Biodiesel allotment decree was awaited by market

Indonesia had prepared to release greater biodiesel mix on Jan. 1

Palm oil benchmark agreement rose 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market until the end of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to release the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia told press reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel producers and fuel merchants will be offered till Feb. 28 to adapt to the B40 mix. She stated the delay was since of technical difficulties connected to subsidies for the fuel.

The non-implementation on Jan. 1. had resulted in a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had stated they were not able to prepare agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 showed an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

Of the total allotment for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be sold at market price. The non-PSO allotment is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the cost gap between the palm oil and fossil fuels for the total allowance.

BPDPKS, the firm in charge of collecting and handling the palm oil funds, estimated in November B40 would need a 68% aid increase.

To help fund that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the existing 7.5%, but for that to happen, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)