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

Industry individuals seeking phase-in duration expect steady intro

Industry faces technical difficulties and cost concerns

Government funding concerns develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually sustained issues it could curb worldwide palm oil materials, looks significantly likely to be implemented slowly, analysts said, as industry participants seek a phase-in period.

Indonesia, the world's biggest 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 might press rates even more in 2025.

While the government of President Prabowo Subianto has stated consistently the strategy is on track for full launch in the new year, industry watchers state costs and technical challenges are likely to result in partial application before full adoption across the sprawling island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and keep B40, which will be finished throughout a "transition duration after government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with government authorities and biodiesel producers recently, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, and that biodiesel manufacturers are all set to supply the greater mix.

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

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

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

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

FUNDING CHALLENGES

For the federal government, moneying the higher blend could likewise be an obstacle as palm oil now costs around $400 per metric load more than crude oil. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required 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 hike is imminent.

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

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

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, stated B40 execution would be challenging in 2025.

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

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