Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals seeking phase-in duration expect gradual introduction

Industry deals with technical obstacles and expense concerns

Government funding issues occur due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually sustained issues it might suppress worldwide palm oil supplies, looks significantly likely to be executed gradually, analysts said, as market individuals seek a phase-in period.

Indonesia, the world’s biggest producer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has actually set off a jump in palm futures and might press rates further in 2025.

While the government of President Prabowo Subianto has actually said consistently the plan is on track for complete launch in the new year, industry watchers state expenses and technical challenges are most likely to lead to partial application before full adoption throughout the sprawling archipelago.

Indonesia’s greatest fuel seller, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and keep B40, which will be finished throughout a “transition duration after federal government develops the mandate”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.

During a conference with officials and biodiesel producers recently, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel retailers’ association, did not immediately respond to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be executed slowly, which biodiesel manufacturers are prepared to provide the higher blend.

“I have verified the preparedness with all manufacturers recently,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the government has actually not provided allocations for producers to offer to fuel retailers, which it generally has actually done by this time of the year.

“We can’t perform without purchase order files, and purchase order documents are gotten after we get agreements with fuel companies,” Gunawan told Reuters. “Fuel business can just sign contracts 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 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 petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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

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

“I believe there will be a delay, since if it is carried out, the subsidy will increase. Where will (the cash) originate from?” he said.

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

“The application might be sluggish and steady in 2025 and probably more fast-paced in 2026,” he stated.

Prabowo, who took office 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; Editing by Tony Munroe and Lincoln Feast.)