Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals looking for phase-in period expect gradual intro

Industry deals with technical challenges and cost issues

Government financing concerns arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually sustained concerns it might curb worldwide palm oil materials, looks increasingly likely to be carried out slowly, experts stated, as market individuals seek a phase-in duration.

Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and may press rates further in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the new year, market watchers say costs and technical difficulties are likely to lead to partial application before full adoption across the stretching archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to mix and save B40, which will be completed throughout a "shift duration after government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with government officials and biodiesel producers last week, fuel sellers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

Hiswana Migas, the fuel retailers' association, did not right away react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the would not be executed slowly, and that biodiesel producers are prepared to supply the greater mix.

"I have confirmed the preparedness with all manufacturers recently," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has not released allowances for manufacturers to offer to sustain merchants, which it usually has actually done by this time of the year.

"We can't perform without order files, and purchase order documents are gotten after we get agreements with fuel companies," Gunawan told Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allowances)."

The federal government plans to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the higher blend could likewise be a difficulty as palm oil now costs around $400 per metric load more than crude oil. Indonesia uses proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike impends.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, consisting of palm smallholders.

"I think there will be a delay, because if it is implemented, the aid will increase. Where will (the money) originate from?" he stated.

Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, stated B40 execution would be challenging in 2025.

"The implementation may be sluggish and steady in 2025 and most likely more fast-paced in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to attain energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)