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

Industry individuals looking for phase-in period expect gradual intro

Industry deals with technical difficulties and cost issues

Government funding concerns develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it could curb worldwide palm oil supplies, looks progressively likely to be executed gradually, experts stated, as industry participants 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 actually set off a jump in palm futures and might press rates even more in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the new year, market watchers state costs and are likely to lead to partial execution before full adoption throughout the stretching archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, stated it needs to modify some of its fuel terminals to blend and keep B40, which will be finished during a "shift period after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with federal government officials and biodiesel producers recently, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, told Reuters.

Hiswana Migas, the fuel sellers' association, did not immediately react to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, which biodiesel manufacturers are all set to supply the higher blend.

"I have confirmed the readiness with all producers recently," she stated.

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 allowances for producers to offer to fuel sellers, which it normally has actually done by this time of the year.

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

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 preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher mix might also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses earnings from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

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

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

"I think there will be a hold-up, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he said.

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

"The application may be sluggish and gradual in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took office 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; Editing by Tony Munroe and Lincoln Feast.)