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

Industry participants looking for phase-in duration expect gradual introduction

Industry deals with technical difficulties and expense issues

Government financing problems emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it could suppress worldwide palm oil supplies, looks increasingly most likely to be carried out gradually, experts stated, as industry participants look for 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 triggered a dive in palm futures and may pressure costs even more in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the brand-new year, market watchers say costs and technical obstacles are likely to result in partial execution before full adoption throughout the stretching archipelago.

Indonesia’s greatest fuel retailer, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and store B40, which will be finished throughout a “transition duration after federal government establishes the required”, spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government officials and biodiesel manufacturers recently, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, told Reuters.

Hiswana Migas, the fuel sellers’ association, did not immediately react to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be executed slowly, and that biodiesel producers are all set to supply the higher blend.

“I have validated the readiness with all producers recently,” she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has not released allowances for producers to sell to fuel merchants, which it usually has done by this time of the year.

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

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 preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher mix might likewise be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses profits from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% boost in aids 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 looms.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.

“I believe there will be a hold-up, due to the fact that if it is executed, the subsidy will increase. Where will (the money) come from?” he said.

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

“The implementation might be sluggish and progressive in 2025 and most likely more hectic in 2026,” he said.

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