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

Industry participants looking for phase-in duration anticipate gradual intro

Industry faces technical difficulties and expense issues

Government financing issues arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually sustained issues it could suppress worldwide palm oil supplies, looks progressively most likely to be executed slowly, experts said, as industry participants seek a phase-in period.

Indonesia, the world's most significant 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 actually activated a jump in palm futures and might press rates further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for complete launch in the new year, market watchers say costs and technical difficulties are likely to lead to partial execution before complete adoption throughout the sprawling archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and keep B40, which will be finished during a "transition duration after government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without providing details.

During a conference with government officials and biodiesel producers last week, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented gradually, and that biodiesel manufacturers are ready to provide the greater mix.

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

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

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

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

FUNDING CHALLENGES

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

In November, BPDPKS approximated it needed 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 impends.

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

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

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

"The implementation might be sluggish and progressive in 2025 and most likely more busy in 2026," he said.

Prabowo, who took workplace 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