Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry participants looking for phase-in period anticipate steady intro

Industry deals with technical difficulties and cost issues

Government financing concerns develop due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it might suppress global palm oil materials, looks significantly likely to be executed gradually, experts said, as industry participants look for a phase-in period.

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 actually activated a dive in palm futures and may press costs further in 2025.

While the government of President Prabowo Subianto has actually said consistently the plan is on track for full launch in the new year, market watchers state costs and technical challenges are likely to result in partial application before complete adoption across the stretching archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to customize some of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without offering details.

During a conference with federal government officials and biodiesel manufacturers last week, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be executed gradually, which biodiesel producers are prepared to provide the greater blend.

"I have actually verified the preparedness with all manufacturers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has actually not provided allowances for producers to sell to sustain retailers, which it usually has done by this time of the year.

"We can't deliver the items without order files, and order files are obtained after we get contracts with fuel business," Gunawan informed Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allotments)."

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

FUNDING CHALLENGES

For the federal government, moneying the greater mix could also be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses profits from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated 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 hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, consisting of palm smallholders.

"I believe there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) come from?" he said.

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

"The execution may be sluggish and steady in 2025 and probably more busy 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)