Indonesia s Higher Biodiesel Mandate Rollout May Be Gradual

Indonesia insists B40 biodiesel application to proceed on Jan. 1


Industry individuals seeking phase-in duration anticipate progressive introduction


Industry deals with technical obstacles and expense concerns


Government financing issues develop due to palm oil price disparity


JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might suppress global palm oil supplies, looks increasingly likely to be carried out slowly, analysts stated, as industry individuals look for a phase-in period.


Indonesia, the world's greatest manufacturer and exporter of palm oil, prepares to raise the of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and might push costs even more in 2025.


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


Indonesia's greatest fuel seller, state-owned Pertamina, said it requires to customize some of its fuel terminals to mix and save B40, which will be completed throughout a "shift duration after federal government develops the required", representative Fadjar Djoko Santoso informed Reuters, without offering information.


During a conference with federal government officials and biodiesel manufacturers recently, fuel merchants requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, informed Reuters.


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


Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be carried out slowly, and that biodiesel manufacturers are all set to provide the greater mix.


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


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


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


The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial price quote of 16 million kilolitres.


FUNDING CHALLENGES


For the federal government, funding the higher blend could also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses proceeds from palm oil export levies, managed by an agency 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 walking looms.


However, the palm oil industry would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.


"I think there will be a hold-up, because if it is implemented, the aid will increase. Where will (the cash) come from?" he said.


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


"The implementation may be sluggish and progressive in 2025 and probably more hectic in 2026," he said.


Prabowo, who took office in October, campaigned on a platform to raise the required even more 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.)