Biodiesel allowance decree was waited for by market

Indonesia had planned to release greater biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the industry until the end of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually planned to introduce the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has been signed," the minister Bahlil Lahadalia told reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel sellers will be provided until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical obstacles connected to aids for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel producers had actually stated they were unable to draw up agreements for biodiesel distribution without the decree.

The biodiesel allocation for 2025 showed a boost from 2024's approximated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

Of the total allowance for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The staying allowances will be cost market cost. The non-PSO allocation is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the cost gap between the palm oil and fossil fuels for the overall allotment.

BPDPKS, the firm in charge of gathering and handling the palm oil funds, approximated in November B40 would need a 68% aid increase.

To help finance that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, but for that to happen, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)