Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals looking for phase-in period anticipate gradual intro

Industry deals with technical difficulties and cost issues

Government financing issues occur due to palm oil rate disparity

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

Indonesia, the world’s greatest producer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a jump in palm futures and might push rates further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the brand-new year, industry watchers state costs and technical difficulties are likely to lead to partial implementation before complete adoption throughout the sprawling archipelago.

Indonesia’s biggest fuel seller, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and store B40, which will be completed during a “transition period after federal government establishes the mandate”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with government authorities and biodiesel producers recently, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of association APROBI, who remained in attendance, told Reuters.

Hiswana Migas, the fuel sellers’ association, did not right away react to a request for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be carried out gradually, which biodiesel producers are ready to supply the higher mix.

“I have verified the preparedness 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 government has not released allowances for manufacturers to offer to sustain retailers, which it typically has done by this time of the year.

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

The federal government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the greater mix might likewise be an obstacle as palm oil now costs around $400 per metric lot more than petroleum. Indonesia utilizes profits from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

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

However, the palm oil market would challenge a levy hike, said 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, because if it is carried out, the aid will increase. Where will (the money) come from?” he said.

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

“The execution might be slow and steady in 2025 and most likely more fast-paced in 2026,” he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required further 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