Indonesia firmly insists B40 biodiesel execution to proceed on Jan. 1

Industry participants looking for phase-in period expect steady introduction

Industry deals with technical obstacles and cost concerns

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress global palm oil materials, looks increasingly most likely to be carried out gradually, experts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and might push rates further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the strategy is on track for full launch in the new year, market watchers state expenses and technical challenges are most likely to result in partial implementation before complete adoption throughout the stretching archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and store B40, which will be finished throughout a "transition period after federal government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

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

Hiswana Migas, the fuel retailers' association, did not right away react to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be implemented slowly, and that biodiesel manufacturers are all set to provide the higher mix.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not provided allowances for producers to offer to fuel retailers, which it generally has done by this time of the year.

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

The government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix could likewise be a difficulty as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

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

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

"I believe there will be a hold-up, because if it is implemented, the aid will increase. Where will (the cash) come from?" he stated.

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

"The execution might be slow and progressive in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more 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; Editing by Tony Munroe and Lincoln Feast.)