Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry individuals seeking phase-in period expect steady introduction

Industry faces technical difficulties and expense concerns

Government funding problems develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has sustained issues it might suppress international palm oil supplies, 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 manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and may press rates further in 2025.

While the federal government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the brand-new year, industry watchers say expenses and technical obstacles are most likely to result in partial execution before complete adoption across the sprawling island chain.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and store B40, which will be finished throughout a "transition duration after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with government authorities and biodiesel manufacturers last week, fuel merchants requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, told Reuters.

Hiswana Migas, the fuel sellers' association, did not instantly react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be executed slowly, and that biodiesel producers are ready to supply the greater blend.

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

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

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

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

FUNDING CHALLENGES

For the government, moneying the higher blend could likewise be a difficulty as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes profits from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

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

However, the palm oil market would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the industry, consisting of palm smallholders.

"I believe there will be a hold-up, since if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

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

"The implementation may be slow and steady in 2025 and most likely more hectic in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)