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

Industry individuals seeking phase-in duration anticipate gradual introduction

Industry faces technical obstacles and expense concerns

Government funding concerns emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s strategy to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it might curb international palm oil materials, looks significantly most likely to be executed slowly, analysts stated, as industry individuals look for a phase-in period.

Indonesia, the world’s greatest producer 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 triggered a dive in palm futures and might pressure prices even more in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the strategy is on track for complete launch in the brand-new year, market watchers state costs and technical challenges are most likely to lead to partial execution before full adoption across the sprawling island chain.

Indonesia’s most significant fuel seller, state-owned Pertamina, stated it needs to customize some of its fuel terminals to mix and save B40, which will be finished during a “transition period after government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with government authorities and biodiesel producers recently, fuel retailers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel sellers’ association, did not instantly react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out gradually, which biodiesel manufacturers are ready to provide the higher mix.

“I have verified the readiness with all producers recently,” she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has actually not issued allocations for manufacturers to sell to sustain retailers, which it generally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

However, the palm oil market would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, including palm smallholders.

“I think there will be a hold-up, because if it is implemented, the subsidy will increase. Where will (the money) originate from?” he said.

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

“The execution might be slow and steady in 2025 and most likely more fast-paced in 2026,” he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) ( by Bernadette Christina