Indonesia firmly insists B40 biodiesel implementation to continue on Jan. 1

Industry participants seeking phase-in duration anticipate progressive intro

Industry deals with technical difficulties and expense issues

Government funding problems arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might suppress international palm oil supplies, looks progressively most likely to be carried out slowly, analysts said, as market participants seek a phase-in period.

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

While the government of President Prabowo Subianto has actually stated repeatedly the plan is on track for complete launch in the brand-new year, market watchers say expenses and technical difficulties are likely to result in partial implementation before complete adoption across the stretching island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and store B40, which will be completed throughout a "shift period after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with federal government authorities and biodiesel producers last week, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be implemented gradually, which biodiesel producers are all set to provide the higher mix.

"I have actually verified the readiness with all manufacturers recently," 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 provided allowances for manufacturers to sell to sustain merchants, which it normally has done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, funding the greater blend could also be an obstacle as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

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

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, consisting of palm smallholders.

"I believe there will be a delay, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.

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

"The execution may be slow and gradual 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 further to B50 or B60 to attain energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina