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Biodiesel allocation decree was awaited by market

Indonesia had prepared to release greater biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to introduce the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia informed press reporters, adding the government was working to increase the necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel manufacturers and fuel retailers will be offered until Feb. 28 to adjust to the B40 mix. She said the hold-up was because of technical obstacles connected to subsidies for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel retailers and biodiesel producers had actually stated they were unable to prepare agreements for biodiesel distribution without the decree.

The biodiesel allocation for 2025 indicated an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry data showed on Friday.

Of the total allocation for this year, 7.55 million KL is for the public service responsibility (PSO), which covers sectors such as public transportation, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the rate space between the palm oil and nonrenewable fuel sources for the overall allocation.

BPDPKS, the company in charge of collecting and managing the palm oil funds, approximated in November B40 would need a 68% .

To help fund that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, but for that to occur, another official policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)