Biodiesel allowance decree was awaited by market

Indonesia had prepared to launch higher biodiesel mix on Jan. 1

Palm oil benchmark contract increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the industry until the end of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually planned to release the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has been signed," the minister Bahlil Lahadalia told reporters, adding the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel merchants will be offered until Feb. 28 to adjust to the B40 mix. She said the delay was because of technical obstacles linked to subsidies for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil benchmark agreement on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had actually stated they were not able to prepare agreements for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry information showed on Friday.

Of the total allocation for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.

"The staying allowances will be cost market price. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the price space between the palm oil and fossil fuels for the overall allowance.

BPDPKS, the agency in charge of gathering and handling the palm oil funds, approximated in November B40 would need a 68% subsidy increase.

To assist fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to happen, another main guideline is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)