Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry participants seeking phase-in duration anticipate gradual introduction

Industry deals with technical obstacles and expense concerns

Government financing issues emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled issues it could suppress global palm oil supplies, looks progressively likely to be executed slowly, experts stated, as industry participants look for a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a jump in palm futures and may press prices further in 2025.

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

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to mix and keep B40, which will be finished during a "transition period after federal government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a meeting with federal government officials and biodiesel manufacturers last week, fuel sellers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be implemented slowly, and that biodiesel manufacturers are prepared to provide the greater blend.

"I have actually confirmed the preparedness with all manufacturers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not released allocations for manufacturers to offer to fuel merchants, which it generally has actually done by this time of the year.

"We can't deliver the goods without order files, and purchase order files are gotten after we get contracts with fuel business," Gunawan informed Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allowances)."

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

FUNDING CHALLENGES

For the government, moneying the greater blend could also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes earnings from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% increase in aids 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 object to a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.

"I think there will be a delay, because if it is implemented, the aid will increase. Where will (the cash) originate from?" he said.

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

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

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more 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; Editing by Tony Munroe and Lincoln Feast.)