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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants looking for phase-in period anticipate gradual intro

Industry deals with technical challenges and expense issues

Government financing issues emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it might suppress international palm oil products, looks progressively likely to be implemented slowly, experts stated, as market participants look for a phase-in period.

Indonesia, the world's greatest producer 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 triggered a jump in palm futures and might push costs even more in 2025.

While the government of President Prabowo Subianto has stated repeatedly the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical obstacles are likely to result in partial execution before complete adoption across the stretching island chain.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and keep B40, which will be completed during a "transition period after federal government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with government officials and biodiesel manufacturers last week, fuel merchants asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, told 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 executed gradually, and that biodiesel producers are prepared to supply the greater blend.

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

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

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

The federal government plans 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 government, funding the higher mix might likewise be an obstacle as palm oil now costs around $400 per metric ton 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 estimated 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, sustaining market speculation that a levy walking is impending.

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 market, consisting of palm smallholders.

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

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

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

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