Indonesia firmly insists B40 biodiesel application to continue on Jan. 1

Industry individuals seeking phase-in period anticipate progressive intro

Industry faces technical challenges and expense concerns

Government financing problems occur due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled issues it could curb international palm oil products, looks increasingly likely to be carried out slowly, analysts said, as industry individuals seek a phase-in period.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the necessary mix of palm oil in to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and may pressure costs further in 2025.

While the government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the new year, market watchers say expenses and technical challenges are likely to result in partial implementation before full adoption across the sprawling archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and store B40, which will be completed during a "transition period after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without offering details.

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

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, which biodiesel manufacturers are all set to supply the higher blend.

"I have validated the preparedness with all producers recently," she said.

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

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

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

FUNDING CHALLENGES

For the government, funding the higher blend might likewise be a challenge as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking impends.

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

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

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

"The implementation might be sluggish and progressive in 2025 and most likely more busy in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina