Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in period anticipate steady introduction

Industry deals with technical obstacles and expense issues

Government financing issues emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it might suppress worldwide palm oil materials, looks increasingly most likely to be executed slowly, experts said, as market individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and may push costs even more in 2025.

While the government of President Prabowo Subianto has stated consistently the plan is on track for complete launch in the new year, market watchers state expenses and technical challenges are most likely to result in partial implementation before complete adoption throughout the sprawling island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and save B40, which will be finished throughout a "transition period after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel manufacturers recently, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be carried out slowly, and that biodiesel producers are prepared to provide the higher blend.

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not issued allowances for manufacturers to offer to sustain retailers, which it generally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, moneying the greater mix might also be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia utilizes profits 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 subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike impends.

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

"I believe there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) come from?" he stated.

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

"The execution might be slow and progressive in 2025 and probably more fast-paced in 2026," he said.

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