Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in duration expect gradual intro

Industry deals with technical challenges and expense issues

Government financing concerns emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has actually sustained issues it might suppress international palm oil products, looks progressively most likely to be carried out slowly, experts stated, as market individuals look for a phase-in duration.

Indonesia, the world's greatest manufacturer 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 set off a dive in palm futures and may push costs further in 2025.

While the government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the brand-new year, industry watchers say expenses and technical difficulties are most likely to result in partial application before complete adoption across the stretching island chain.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be finished during a "shift duration after federal government develops the required", representative Fadjar Djoko Santoso informed Reuters, without providing information.

During a conference with federal government officials and biodiesel manufacturers recently, fuel merchants requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be executed slowly, which biodiesel manufacturers are prepared to provide the higher blend.

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

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

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

The federal 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 might also be a difficulty as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia utilizes proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated 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, sustaining market speculation that a levy walking impends.

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

"I believe there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) come from?" he stated.

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

"The application may be sluggish and gradual 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 required 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; Editing by Tony Munroe and Lincoln Feast.)