Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry individuals seeking phase-in period anticipate progressive intro

Industry faces technical challenges and cost concerns

Government funding issues arise due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually sustained issues it could curb international palm oil materials, looks increasingly likely to be executed slowly, analysts stated, as market participants look for a phase-in period.

Indonesia, the world's biggest producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a dive in palm futures and might pressure costs even more in 2025.

While the federal government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical difficulties are likely to lead to partial implementation before complete adoption throughout the stretching archipelago.

Indonesia's greatest fuel merchant, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and store B40, which will be completed throughout a "shift duration after federal government develops the required", representative Fadjar Djoko Santoso told Reuters, without supplying information.

During a conference with federal government authorities and biodiesel manufacturers recently, fuel sellers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not instantly react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be executed gradually, which biodiesel manufacturers are all set to provide the higher mix.

"I have verified the preparedness with all manufacturers last week," she said.

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

"We can't provide the items without order documents, and purchase order documents are gotten after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allotments)."

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 federal government, moneying the higher blend could likewise be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike is imminent.

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, since if it is carried out, the aid will increase. Where will (the cash) 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 probably more busy in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to accomplish 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.)