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

Industry individuals looking for phase-in duration anticipate steady intro

Industry faces technical difficulties and cost concerns

Government financing problems occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually sustained issues it might suppress worldwide palm oil products, looks increasingly most likely to be executed slowly, experts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest manufacturer 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 activated a dive in palm futures and might pressure costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated repeatedly the plan is on track for complete launch in the new year, industry watchers say costs and technical obstacles are most likely to lead to partial execution before complete adoption throughout the stretching archipelago.

Indonesia's greatest fuel merchant, state-owned Pertamina, said it needs to customize some of its fuel terminals to mix and save B40, which will be completed during a "shift period after federal government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with federal government officials and biodiesel producers last week, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be implemented slowly, and that biodiesel producers are prepared to supply the greater mix.

"I have actually validated the readiness with all manufacturers last week," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the federal government has not provided allocations for manufacturers to offer to sustain retailers, which it usually has actually done by this time of the year.

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

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 initial quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend might also be a challenge as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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

However, the palm oil market would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, including palm smallholders.

"I believe there will be a hold-up, because if it is executed, the subsidy will increase. Where will (the cash) come from?" he stated.

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

"The execution might be slow and gradual in 2025 and most likely more busy in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate 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; Editing by Tony Munroe and Lincoln Feast.)