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

Industry individuals looking for phase-in duration anticipate steady intro

Industry deals with technical difficulties and expense concerns

Government financing issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has sustained issues it might curb worldwide palm oil products, looks increasingly most likely to be carried out gradually, analysts stated, as market participants seek a phase-in duration.

Indonesia, the world's biggest 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 activated a dive in palm futures and may pressure rates further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the strategy is on track for full launch in the new year, market watchers state costs and technical challenges are most likely to result in partial application before full adoption throughout the stretching island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and store B40, which will be completed throughout a "shift period after government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a meeting with federal government authorities and biodiesel manufacturers last week, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not instantly respond to a demand for remark.

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

"I have validated the preparedness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not released allocations for manufacturers to offer to fuel sellers, which it typically has done by this time of the year.

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

The federal government plans 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 federal government, moneying the higher blend could likewise be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking is impending.

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

"I believe there will be a delay, since if it is carried out, the subsidy will increase. Where will (the cash) come from?" he said.

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

"The implementation may be sluggish and progressive in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the 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