Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry participants looking for phase-in period expect progressive introduction

Industry faces technical obstacles and expense issues

Government funding concerns develop due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia’s plan to expand its biodiesel required from Jan. 1, which has actually sustained concerns it could curb international palm oil supplies, looks progressively likely to be executed gradually, analysts stated, as market individuals seek a phase-in period.

Indonesia, the world’s most significant manufacturer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and might press prices even more in 2025.

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

Indonesia’s most significant fuel merchant, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and keep B40, which will be finished throughout a “transition duration after federal government establishes the mandate”, spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with federal government officials and biodiesel producers recently, fuel sellers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, informed Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be executed slowly, and that biodiesel producers are all set to supply the greater mix.

“I have actually validated the readiness with all manufacturers last week,” she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has actually not provided allowances for producers to offer to fuel merchants, which it normally has actually done by this time of the year.

“We can’t provide the goods without purchase order files, and purchase order files are obtained after we get contracts with fuel companies,” Gunawan informed Reuters. “Fuel companies can just sign contracts after the ministerial decree (on biodiesel allocations).”

The government plans to allocate 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 government, moneying the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric load more than crude oil. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in subsidies 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 looms.

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

“I think there will be a delay, since if it is executed, the subsidy will increase. Where will (the money) originate from?” he said.

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

“The implementation may be slow and steady in 2025 and probably more busy in 2026,” he said.

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