Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants looking for phase-in period expect progressive intro

Industry faces technical difficulties and expense issues

Government funding problems occur due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel required from Jan. 1, which has fuelled issues it could suppress global palm oil supplies, looks significantly most likely to be carried out gradually, experts stated, as industry individuals look for a phase-in period.

Indonesia, the world’s biggest manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in to 40% – called B40 – from 35%, a policy that has triggered a jump in palm futures and may pressure prices even more in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the new year, market watchers say expenses and technical difficulties are most likely to lead to partial application before complete adoption throughout the stretching island chain.

Indonesia’s biggest fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and store B40, which will be finished during a “shift period after government develops the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with government officials and biodiesel producers recently, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants’ association, did not instantly react to a request for comment.

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

“I have actually confirmed 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 provided allotments for producers to offer to sustain retailers, which it normally has done by this time of the year.

“We can’t perform without order files, and purchase order files are acquired after we get agreements with fuel business,” Gunawan informed Reuters. “Fuel business can just sign contracts after the ministerial decree (on biodiesel allocations).”

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

FUNDING CHALLENGES

For the government, moneying the higher mix might likewise be a challenge as palm oil now costs around $400 per metric heap more than crude oil. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% increase 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 hike is imminent.

However, the palm oil industry would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.

“I think there will be a delay, since if it is carried out, the subsidy will increase. Where will (the cash) come from?” he stated.

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

“The implementation may be sluggish and steady in 2025 and probably more fast-paced in 2026,” he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to achieve 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.)