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

Industry participants looking for phase-in period anticipate steady intro

Industry deals with technical challenges and expense issues

Government financing issues emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it might curb international palm oil materials, looks increasingly likely to be carried out slowly, experts said, as industry individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a jump in palm futures and may push costs even more in 2025.

While the federal government of President Prabowo Subianto has actually said consistently the plan is on track for complete launch in the brand-new year, industry watchers say expenses and technical obstacles are likely to lead to partial application before complete adoption across the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and save B40, which will be completed throughout a "transition period after government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without offering information.

During a conference with federal government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out slowly, which biodiesel producers are prepared to supply the greater blend.

"I have validated the preparedness 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 government has actually not issued allowances for manufacturers to sell to sustain sellers, which it usually has done by this time of the year.

"We can't provide the products without order documents, and order files are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allotments)."

The government prepares to assign 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 federal government, funding the higher mix could also be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes profits from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% increase 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 walking is imminent.

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

"I believe there will be a hold-up, due to the fact that if it is implemented, the subsidy will increase. Where will (the money) originate from?" he stated.

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

"The application may be slow and gradual in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took workplace 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)