Indonesia firmly insists B40 biodiesel application to proceed on Jan. 1
Industry individuals seeking phase-in duration expect gradual intro
Industry faces technical difficulties and expense concerns
Government funding problems emerge due to palm oil rate variation
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it might suppress international palm oil supplies, looks progressively likely to be implemented gradually, experts stated, as market individuals look for a phase-in period.
Indonesia, the world's greatest manufacturer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and may press prices further in 2025.
While the government of President Prabowo Subianto has said repeatedly the strategy is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are most likely to result in partial application before full adoption throughout the sprawling island chain.
Indonesia's greatest fuel retailer, state-owned Pertamina, said it needs to customize some of its fuel terminals to blend and save B40, which will be finished during a "shift period after federal government establishes the mandate", representative Fadjar Djoko Santoso told Reuters, without providing details.
During a meeting with federal government officials and biodiesel producers last week, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, informed Reuters.
Hiswana Migas, the fuel retailers' association, did not instantly react to an ask for remark.
Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be executed slowly, which biodiesel producers are all set to supply the higher mix.
"I have actually verified the readiness with all manufacturers last week," she stated.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has actually not provided allowances for producers to sell to fuel sellers, which it usually has actually done by this time of the year.
"We can't deliver the items without order files, and purchase order files are gotten after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just 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 informed Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, moneying the greater mix could also be a challenge as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.
In November, BPDPKS estimated 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, fuelling market speculation that a levy hike looms.
However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the industry, including palm smallholders.
"I believe there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the money) come from?" he said.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.
"The implementation might be slow and steady in 2025 and most likely more fast-paced in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish 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.)
