Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry individuals seeking phase-in duration anticipate steady introduction

Industry faces technical challenges and expense concerns

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb international palm oil supplies, looks increasingly likely to be implemented slowly, analysts stated, as industry participants look for a phase-in duration.

Indonesia, the world’s biggest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has activated a dive in and might press rates further in 2025.

While the federal government of President Prabowo Subianto has actually stated repeatedly the plan is on track for complete launch in the brand-new year, industry watchers say expenses and technical difficulties are most likely to result in partial implementation before complete adoption throughout the sprawling island chain.

Indonesia’s most significant fuel merchant, state-owned Pertamina, said it requires to modify a few of its fuel terminals to blend and keep B40, which will be completed throughout a “transition period after federal government establishes the mandate”, representative Fadjar Djoko Santoso told Reuters, without providing details.

During a meeting with government officials and biodiesel producers last week, fuel sellers requested 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 immediately react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be executed slowly, which biodiesel manufacturers are ready to supply the higher blend.

“I have actually verified the preparedness with all producers last week,” she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has actually not issued allocations for manufacturers to offer to sustain merchants, which it typically has done by this time of the year.

“We can’t perform without purchase order documents, and order documents are acquired after we get contracts with fuel business,” Gunawan told Reuters. “Fuel business can just sign contracts after the ministerial decree (on biodiesel allowances).”

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

FUNDING CHALLENGES

For the government, funding the greater blend might likewise be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated 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, fuelling market speculation that a levy walking looms.

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

“I think there will be a hold-up, since if it is executed, the aid will increase. Where will (the money) originate from?” he stated.

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

“The implementation may be sluggish and progressive in 2025 and most likely 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 attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)