Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry individuals looking for phase-in period expect steady intro

Industry deals with technical difficulties and cost issues

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually sustained issues it might suppress worldwide palm oil materials, looks progressively likely to be executed gradually, analysts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest producer 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 actually set off a dive in palm futures and might pressure rates further in 2025.

While the government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, market watchers say expenses and technical obstacles are most likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to blend and store B40, which will be finished during a "transition duration after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without offering details.

During a meeting with government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

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

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

"I have validated the readiness with all manufacturers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has actually not provided allocations for manufacturers to sell to sustain sellers, which it normally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the greater mix could also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

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 looms.

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

"I think there will be a delay, since if it is carried out, the aid will increase. Where will (the money) originate from?" he stated.

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

"The execution may be slow and gradual in 2025 and probably more busy in 2026," he said.

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