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

Industry individuals seeking phase-in period expect steady intro

Industry faces technical obstacles and cost issues

Government funding problems emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might suppress global palm oil supplies, looks increasingly likely to be executed gradually, analysts stated, as market individuals look for 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 actually set off a dive in palm futures and may pressure rates even more in 2025.

While the federal government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for complete launch in the brand-new year, industry watchers state expenses and technical challenges are likely to lead to partial application before full adoption throughout the sprawling island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to blend and store B40, which will be during a "shift period after government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a conference with federal government officials and biodiesel producers recently, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented gradually, which biodiesel manufacturers are ready to provide the greater mix.

"I have actually validated the preparedness with all producers recently," 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 allotments for producers to offer to fuel sellers, which it usually has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, funding the higher blend could also be a difficulty as palm oil now costs around $400 per metric ton 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 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, sustaining market speculation that a levy hike looms.

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

"I think there will be a hold-up, due to the fact that 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 implementation would be challenging in 2025.

"The application may be sluggish and gradual in 2025 and probably more hectic in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to accomplish 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.)