Biodiesel allocation decree was waited for by industry

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

Palm oil criteria agreement increased 1% after previous fall

Government aims 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the market until completion of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had prepared to introduce the necessary 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, including the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel retailers will be provided up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was because of technical difficulties connected to aids for the fuel.

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

Fuel sellers and biodiesel manufacturers had said they were unable to prepare contracts for biodiesel distribution without the decree.

The biodiesel allocation for 2025 suggested a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry information showed on Friday.

Of the total allowance for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be cost market value. The non-PSO allocation is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the price gap in between the palm oil and fossil fuels for the total allowance.

BPDPKS, the firm in charge of gathering and handling the palm oil funds, estimated in November B40 would need a 68% aid increase.

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