Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals looking for phase-in period expect steady introduction

Industry deals with technical obstacles and expense concerns

Government financing concerns emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually sustained concerns it could curb worldwide palm oil supplies, looks significantly likely to be carried out slowly, experts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant 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 actually set off a dive in palm futures and may pressure rates further in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, market watchers say expenses and technical obstacles are likely to result in partial execution before complete adoption across the sprawling archipelago.

Indonesia's biggest fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and keep B40, which will be completed during a "shift duration after federal government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing information.

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

Hiswana Migas, the fuel merchants' association, did not right away react to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be carried out gradually, which biodiesel producers are prepared to supply the greater blend.

"I have verified the readiness with all manufacturers recently," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has not issued allotments for manufacturers to sell to sustain sellers, which it generally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, funding the greater mix might also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses proceeds from palm oil export levies, handled by an agency 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 hike is imminent.

However, the palm oil market would object to a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the market, including palm smallholders.

"I believe there will be a delay, because if it is implemented, the subsidy will increase. Where will (the cash) originate from?" he stated.

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

"The implementation might be slow and steady in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required even more to B50 or B60 to attain 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.)