Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants seeking phase-in duration anticipate gradual introduction

Industry faces technical obstacles and cost concerns

Government financing problems develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel mandate from Jan. 1, which has fuelled issues it might curb international palm oil products, looks significantly likely to be executed slowly, experts said, as market individuals seek a phase-in period.

Indonesia, the world’s biggest manufacturer 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 actually triggered a jump in palm futures and might pressure prices further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the brand-new year, industry watchers say expenses and technical obstacles are most likely to lead to partial implementation before full adoption throughout the sprawling island chain.

Indonesia’s biggest fuel merchant, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and save B40, which will be finished during a “transition period after federal government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with government authorities and biodiesel manufacturers last week, fuel sellers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the association, did not instantly react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out gradually, and that biodiesel manufacturers are all set to provide the higher blend.

“I have actually confirmed the preparedness with all manufacturers last week,” she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has not issued allowances for manufacturers to sell to fuel retailers, which it normally has done by this time of the year.

“We can’t perform without order files, and purchase order files are acquired after we get contracts with fuel companies,” Gunawan told Reuters. “Fuel business can only sign agreements after the ministerial decree (on biodiesel allowances).”

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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the greater blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than crude oil. Indonesia utilizes profits from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed 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 impends.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

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

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

“The implementation might be sluggish and steady in 2025 and most likely 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 attain energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)