Biodiesel allowance decree was awaited by industry

Indonesia had planned to launch greater biodiesel mix on Jan. 1

Palm oil benchmark contract rose 1% after previous fall

Government aims for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market until the end of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to launch the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia informed reporters, adding the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel sellers will be given until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical obstacles linked to subsidies for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil standard agreement on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel producers had said they were not able to prepare contracts for biodiesel circulation without the decree.

The biodiesel allowance for 2025 indicated a boost from 2024's estimated biodiesel consumption of 12.98 KL, ministry information revealed on Friday.

Of the total allowance for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as public transportation, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allotments will be cost market cost. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the rate gap in between the palm oil and nonrenewable fuel sources for the total allotment.

BPDPKS, the agency in charge of gathering and handling the palm oil funds, approximated in November B40 would require a 68% subsidy increase.

To help fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, but for that to occur, another main policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)