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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals seeking phase-in period expect steady intro

Industry faces technical challenges and cost issues

Government funding issues emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb international palm oil supplies, looks progressively likely to be executed slowly, analysts said, as market individuals look for a phase-in period.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and may push prices further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, market watchers state expenses and technical challenges are most likely to lead to partial execution before full adoption across the stretching archipelago.

Indonesia's biggest fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and save B40, which will be finished throughout a "shift duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

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

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, and that biodiesel producers are ready to supply the greater mix.

"I have actually verified the readiness with all manufacturers last week," she said.

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

"We can't perform without purchase order documents, and purchase order documents are gotten after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can just sign agreements after the ministerial decree (on biodiesel allocations)."

The government prepares to allocate 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 federal government, moneying the higher mix could likewise be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a company 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 approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking impends.

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 think there will be a delay, because if it is executed, the aid will increase. Where will (the cash) come from?" he said.

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

"The application might be sluggish and progressive in 2025 and most likely more hectic in 2026," he said.

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