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

Industry participants seeking phase-in duration anticipate progressive introduction

Industry deals with technical difficulties and cost concerns

Government financing concerns occur due to palm oil cost variation

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

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a jump in palm futures and might push rates even more in 2025.

While the government of President Prabowo Subianto has actually said consistently the strategy is on track for complete launch in the new year, industry watchers state expenses and technical challenges are likely to lead to partial implementation before complete adoption throughout the sprawling island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and keep B40, which will be completed throughout a "shift duration after government develops the required", representative Fadjar Djoko Santoso told Reuters, without offering details.

During a conference with government authorities and biodiesel producers recently, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be carried out gradually, and that biodiesel producers are prepared to supply the greater blend.

"I have confirmed the readiness with all producers last week," 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 allotments for manufacturers to offer to sustain retailers, which it generally has actually done by this time of the year.

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

The 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

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

In November, BPDPKS approximated it needed 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 walking is impending.

However, the palm oil market would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, including palm smallholders.

"I believe there will be a hold-up, because if it is executed, the subsidy will increase. Where will (the money) originate from?" he stated.

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

"The application may be sluggish and steady in 2025 and probably more busy in 2026," he stated.

Prabowo, who took workplace 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.)