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Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals looking for phase-in duration anticipate steady introduction

Industry faces technical obstacles and cost issues

Government funding problems develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might suppress international palm oil supplies, looks progressively likely to be executed gradually, said, as industry individuals look for a phase-in period.

Indonesia, the world's biggest producer 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 activated a jump in palm futures and might pressure prices further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the strategy is on track for complete launch in the new year, market watchers state costs and technical obstacles are likely to result in partial application before full adoption throughout the stretching island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and save B40, which will be completed throughout a "transition duration after federal government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without offering information.

During a meeting with government authorities and biodiesel producers last week, fuel sellers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not right away react to a demand for remark.

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

"I have actually verified the preparedness with all manufacturers last week," she said.

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

"We can't perform without purchase order documents, and order documents are obtained after we get agreements with fuel business," Gunawan informed Reuters. "Fuel business can only 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 informed Reuters, less than its preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater mix might likewise be a difficulty as palm oil now costs around $400 per metric load more than crude oil. Indonesia utilizes profits from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike is imminent.

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

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

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

"The execution might be slow and gradual in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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; Editing by Tony Munroe and Lincoln Feast.)