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

Industry participants seeking phase-in period anticipate progressive introduction

Industry faces technical challenges and cost concerns

Government funding concerns emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has sustained issues it might suppress global palm oil materials, looks increasingly likely to be implemented gradually, analysts stated, as industry participants 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 actually triggered a jump in palm futures and may pressure costs even more in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the new year, market watchers say costs and technical difficulties are likely to result in partial implementation before complete adoption throughout the sprawling archipelago.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and save B40, which will be completed during a "transition period after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not right away react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be implemented gradually, which biodiesel manufacturers are prepared to provide the greater mix.

"I have confirmed the readiness with all producers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not issued allotments for manufacturers to sell to fuel sellers, which it typically has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend might likewise be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking is impending.

However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, including palm smallholders.

"I believe there will be a delay, due to the fact that if it is implemented, the subsidy will increase. Where will (the money) originate from?" he said.

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

"The execution may be slow and progressive in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further 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; Editing by Tony Munroe and Lincoln Feast.)