Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry individuals seeking phase-in period expect progressive intro

Industry deals with technical challenges and expense concerns

Government financing issues arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually sustained issues it might curb worldwide palm oil materials, looks progressively likely to be implemented slowly, analysts said, as industry participants look for a phase-in period.

Indonesia, the world's greatest manufacturer and exporter of palm oil, plans to raise the necessary mix of in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and might push rates even more in 2025.

While the government of President Prabowo Subianto has said consistently the strategy is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are most likely to lead to partial execution before complete adoption across the stretching archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to mix and save B40, which will be finished during a "transition duration after federal government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

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

Hiswana Migas, the fuel retailers' association, did not right away react to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be implemented slowly, and that biodiesel manufacturers are ready to supply the higher mix.

"I have actually verified 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 government has actually not released allowances for producers to offer to fuel retailers, which it usually has done by this time of the year.

"We can't provide the products without purchase order files, and purchase order documents are gotten after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."

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

FUNDING CHALLENGES

For the federal government, funding the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia utilizes proceeds from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% increase 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 impends.

However, the palm oil market would object to a levy hike, said 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 delay, because if it is implemented, the subsidy will increase. Where will (the cash) come from?" he stated.

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

"The execution might be slow and steady in 2025 and probably more fast-paced in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more to B50 or B60 to attain 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.)