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

Industry participants seeking phase-in period anticipate steady introduction

Industry faces technical obstacles and expense concerns

Government funding problems arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to broaden its biodiesel required from Jan. 1, which has sustained issues it might suppress global palm oil materials, looks progressively most likely to be carried out slowly, experts said, as market participants seek a phase-in duration.

Indonesia, the world’s biggest producer and exporter of palm oil, prepares to raise the necessary mix of in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and might push costs further in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical difficulties are likely to result in partial application before full adoption throughout the stretching archipelago.

Indonesia’s most significant fuel merchant, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and store B40, which will be completed throughout a “transition period after federal government establishes the required”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with federal government authorities and biodiesel producers recently, fuel merchants asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.

Hiswana Migas, the fuel sellers’ association, did not immediately react to a request for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be carried out gradually, which biodiesel manufacturers are prepared to supply the greater mix.

“I have actually confirmed the readiness with all producers recently,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not provided allotments for manufacturers to sell to fuel sellers, which it generally has done by this time of the year.

“We can’t provide the products without purchase order documents, and purchase order files are gotten after we get agreements with fuel companies,” Gunawan informed Reuters. “Fuel business can only sign contracts after the ministerial decree (on biodiesel allotments).”

The federal government plans 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 greater mix might likewise be an obstacle as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia uses profits from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed 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 walking is impending.

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

“I believe there will be a delay, since if it is carried out, the subsidy will increase. Where will (the cash) come from?” he stated.

Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, said B40 application would be challenging in 2025.

“The execution might be sluggish and gradual in 2025 and probably more hectic in 2026,” he stated.

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