Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in period anticipate steady intro

Industry faces technical difficulties and expense concerns

Government financing problems develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually sustained concerns it could suppress worldwide palm oil supplies, looks significantly most likely to be carried out slowly, analysts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's greatest 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 jump in palm futures and may press costs even more in 2025.

While the federal government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the brand-new year, market watchers say expenses and are most likely to result in partial execution before complete adoption throughout the stretching archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it requires to modify a few of its fuel terminals to mix and keep B40, which will be completed throughout a "shift period after federal government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

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

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out gradually, and that biodiesel producers are all set to supply the higher mix.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has not provided allowances for producers to offer to sustain sellers, which it normally 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 contracts with fuel business," Gunawan informed Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."

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 federal government, funding the greater mix could likewise be a challenge as palm oil now costs around $400 per metric heap more than crude oil. Indonesia uses proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% increase in subsidies 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 looms.

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I think there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the money) come from?" he said.

Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.

"The implementation may be sluggish and steady in 2025 and probably more fast-paced in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina