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

Industry individuals looking for phase-in duration anticipate steady intro

Industry faces technical difficulties and cost concerns

Government funding issues emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it might suppress worldwide palm oil products, looks increasingly most likely to be executed gradually, analysts stated, as industry participants look for a phase-in period.

Indonesia, the world's greatest 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 set off a dive in palm futures and might press costs further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the brand-new year, market watchers state expenses and technical challenges are most likely to result in partial application before full adoption across the stretching archipelago.

Indonesia's greatest fuel seller, state-owned Pertamina, said it requires to modify some of its fuel terminals to mix and save B40, which will be completed during a "shift period after government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with government officials and biodiesel producers last week, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, told Reuters.

Hiswana Migas, the fuel sellers' association, did not right away react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be carried out slowly, and that biodiesel manufacturers are ready to supply the higher mix.

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not provided allotments for manufacturers to offer to sustain retailers, which it generally has actually done by this time of the year.

"We can't perform without purchase order files, and order files are gotten after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments)."

The federal 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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher blend might likewise be a difficulty as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

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

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

"I think there will be a delay, since if it is executed, the aid will increase. Where will (the money) come from?" he stated.

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

"The application might be sluggish and progressive in 2025 and most likely more hectic in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required even more to B50 or B60 to attain 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.)