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

Industry individuals seeking phase-in period expect gradual introduction

Industry faces technical obstacles and cost issues

Government funding problems develop due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it might suppress worldwide palm oil products, looks significantly most likely to be executed slowly, analysts stated, as market individuals seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a jump in palm futures and may pressure rates even more in 2025.

While the government of President Prabowo Subianto has actually stated consistently the strategy is on track for complete launch in the new year, market watchers state expenses and technical challenges are most likely to lead to partial execution before full adoption across the stretching archipelago.

Indonesia's greatest fuel retailer, state-owned Pertamina, said it requires to some of its fuel terminals to mix and store B40, which will be finished during a "shift period after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with government authorities and biodiesel producers recently, fuel sellers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not right away respond to a request for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, which biodiesel producers are ready to supply the higher mix.

"I have validated the preparedness with all manufacturers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not released allocations for manufacturers to sell to fuel sellers, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, funding the higher mix might likewise be a challenge as palm oil now costs around $400 per metric heap more than crude oil. Indonesia utilizes profits from palm oil export levies, managed by an agency 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, fuelling market speculation that a levy hike impends.

However, the palm oil market would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, consisting of palm smallholders.

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

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

"The implementation might be sluggish and progressive in 2025 and probably more busy in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina