Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants seeking phase-in period anticipate steady introduction

Industry deals with technical obstacles and cost issues

Government funding issues occur due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has actually sustained concerns it might suppress global palm oil supplies, looks progressively most likely to be implemented slowly, experts said, as market participants look for a phase-in period.

Indonesia, the world's biggest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a jump in palm futures and may press prices further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the plan is on track for complete launch in the brand-new year, industry watchers say expenses and technical difficulties are most likely to lead to partial implementation before full adoption across the sprawling archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and save B40, which will be completed during a "transition period after federal government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with government officials and biodiesel manufacturers last week, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be executed gradually, which biodiesel producers are prepared to provide the greater blend.

"I have verified the readiness with all producers last week," she stated.

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

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

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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend could likewise be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated 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, fuelling market speculation that a levy hike is impending.

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

"I think there will be a delay, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he stated.

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

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

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