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

Industry individuals seeking phase-in period anticipate steady introduction

Industry deals with challenges and cost issues

Government financing concerns emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it could curb global palm oil materials, looks significantly likely to be executed slowly, analysts said, as market participants seek a phase-in duration.

Indonesia, the world's biggest 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 activated a jump in palm futures and might push rates even more in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for complete launch in the new year, industry watchers state expenses and technical challenges are most likely to result in partial application before complete adoption across the sprawling island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, said it requires to customize some of its fuel terminals to mix and store B40, which will be finished throughout a "transition duration after federal government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without offering information.

During a conference with federal government authorities and biodiesel producers recently, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be carried out slowly, and that biodiesel producers are all set to supply the greater mix.

"I have actually confirmed the preparedness with all manufacturers last week," she said.

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

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

The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the greater blend might also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a firm 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 approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

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 think there will be a hold-up, because if it is executed, the aid will increase. Where will (the money) originate from?" he stated.

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

"The application might be sluggish and gradual in 2025 and most likely more busy in 2026," he stated.

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