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

Industry individuals seeking phase-in duration anticipate steady introduction

Industry faces technical challenges and cost concerns

Government financing issues arise due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it could curb worldwide palm oil supplies, looks progressively most likely to be carried out slowly, experts stated, as market participants seek a phase-in period.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and might push costs even more in 2025.

While the government of President Prabowo Subianto has actually stated repeatedly the plan is on track for full launch in the new year, industry watchers state expenses and technical difficulties are most likely to result in partial execution before full adoption across the stretching archipelago.

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

During a meeting with federal government authorities and biodiesel producers last week, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be implemented gradually, which biodiesel manufacturers are prepared to supply the greater blend.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has not released allotments for producers to sell to sustain sellers, which it usually has actually done by this time of the year.

"We can't deliver the items without purchase order files, and purchase order documents are gotten after we get agreements with fuel companies," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allowances)."

The government plans 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, moneying the greater blend might likewise be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% boost 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 walking looms.

However, the palm oil market would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, 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 money) originate from?" he said.

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

"The implementation may be sluggish and progressive in 2025 and probably more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required further 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.)