Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in duration anticipate gradual intro

Industry faces technical obstacles and expense concerns

Government funding issues arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks increasingly likely to be executed gradually, analysts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant 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 activated a dive in palm futures and may push prices further in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the brand-new year, industry watchers say expenses and technical challenges are most likely to result in partial application before complete adoption across the stretching archipelago.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and store B40, which will be finished during a "shift duration after government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with and biodiesel manufacturers last week, fuel retailers asked for 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 right away react to a request for comment.

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

"I have actually validated the preparedness with all manufacturers recently," she stated.

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

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

The government prepares to assign 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, funding the higher blend might also be a challenge as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses profits from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking impends.

However, the palm oil market would object to a levy walking, 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 hold-up, since if it is executed, the subsidy will increase. Where will (the money) originate from?" he stated.

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

"The implementation might be slow and gradual in 2025 and most likely more hectic in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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.)