Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in duration expect progressive intro

Industry faces technical difficulties and cost concerns

Government financing issues arise due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually sustained concerns it might suppress global palm oil supplies, looks increasingly most likely to be implemented slowly, experts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's greatest manufacturer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and may pressure prices even more in 2025.

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

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to blend and keep B40, which will be finished during a "transition period after government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not immediately react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be implemented gradually, and that biodiesel manufacturers are ready to supply the higher mix.

"I have confirmed the preparedness with all manufacturers last week," she stated.

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

"We can't perform without purchase order documents, and purchase order files are gotten after we get agreements with fuel business," Gunawan informed Reuters. "Fuel companies can just sign contracts 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater blend could likewise be a challenge as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by an agency 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 estimated levy collection at around 21 trillion rupiah, fuelling 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 harm the industry, including palm smallholders.

"I believe there will be a delay, since if it is implemented, the aid will increase. Where will (the cash) come from?" he stated.

Nagaraj Meda, handling 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 busy in 2026," he said.

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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)