oleovest-pl

1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

firmly insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period expect steady intro

Industry deals with technical challenges and cost issues

Government funding concerns develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has sustained concerns it could curb worldwide palm oil products, looks progressively most likely to be implemented slowly, experts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the compulsory 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 rates 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, market watchers say costs and technical obstacles are most likely to lead to partial application before complete adoption across the sprawling archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be finished during a "shift duration after federal government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with federal government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be implemented slowly, which biodiesel manufacturers are ready to provide the higher mix.

"I have actually validated the readiness with all manufacturers recently," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has actually not released allocations for manufacturers to offer to fuel merchants, which it generally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, funding the greater mix might likewise be a difficulty as palm oil now costs around $400 per metric load more than crude oil. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% increase in subsidies 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 is impending.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including 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, said B40 execution would be challenging in 2025.

"The implementation might be sluggish and gradual in 2025 and probably more fast-paced in 2026," he said.

Prabowo, who took office 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina