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

Industry individuals seeking phase-in period anticipate progressive introduction

Industry deals with technical challenges and expense concerns

Government financing concerns emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has sustained issues it could curb worldwide palm oil materials, looks increasingly most likely to be implemented gradually, analysts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and may press prices further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the plan is on track for complete launch in the brand-new year, industry watchers state costs and technical obstacles are likely to lead to partial implementation before complete adoption across the sprawling archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to modify some of its fuel terminals to mix and save B40, which will be finished during a "transition period after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

During a meeting with federal government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

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

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

"I have actually validated the preparedness with all producers recently," she stated.

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

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

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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher blend might likewise be an obstacle as palm oil now costs around $400 per metric load more than crude oil. Indonesia utilizes proceeds from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

However, the palm oil industry would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I think there will be a delay, because if it is carried out, the subsidy will increase. Where will (the cash) come from?" he said.

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

"The implementation might be sluggish and steady in 2025 and probably more hectic in 2026," he said.

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