Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals looking for phase-in duration expect gradual introduction

Industry faces technical challenges and cost concerns

Government financing concerns arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has sustained issues it might suppress global palm oil supplies, looks significantly likely to be executed gradually, experts stated, as market individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a jump in palm futures and may push costs further in 2025.

While the government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for full launch in the new year, industry watchers say costs and technical difficulties are likely to lead to partial implementation before full adoption throughout the sprawling island chain.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it needs to modify some of its fuel terminals to mix and store B40, which will be finished during a "transition duration after government develops the required", representative Fadjar Djoko Santoso told Reuters, without providing information.

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

Hiswana Migas, the fuel sellers' association, did not instantly respond to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be executed gradually, and that biodiesel manufacturers are all set to provide the higher blend.

"I have actually validated the preparedness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has not provided allowances for manufacturers to offer to sustain merchants, which it normally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the greater mix might also be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia uses proceeds from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

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

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

"I think there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The application might be sluggish and steady in 2025 and probably more hectic 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina