Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry participants looking for phase-in period expect progressive introduction

Industry faces technical obstacles and expense issues

Government financing issues occur 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 might curb worldwide palm oil products, looks significantly likely to be carried out gradually, analysts said, as market 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 triggered a jump in palm futures and might press rates further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the new year, industry watchers say expenses and technical difficulties are likely to result in partial implementation before complete adoption throughout the stretching archipelago.

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it requires to modify some of its fuel terminals to mix and save B40, which will be completed during a "shift period after government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without offering details.

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

Hiswana Migas, the fuel retailers' association, did not instantly react to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be executed slowly, which biodiesel producers are ready to supply the greater mix.

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has not released allocations for producers to offer to sustain merchants, which it usually has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, funding the greater blend could likewise be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

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

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

"I think there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The execution might be sluggish and progressive in 2025 and probably more busy in 2026," he stated.

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