Biodiesel allocation decree was awaited by market

Indonesia had prepared to release higher biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the market up until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually planned to launch the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually been signed," the minister Bahlil Lahadalia informed press reporters, adding the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel sellers will be given until Feb. 28 to adapt to the B40 mix. She stated the hold-up was since of technical challenges linked to aids for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil benchmark contract on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel manufacturers had actually said they were not able to prepare contracts for biodiesel circulation without the decree.

The biodiesel allocation for 2025 indicated an increase from 2024's approximated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

Of the overall allotment for this year, 7.55 million KL is for the general public service responsibility (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The staying allocations will be sold at market value. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the general allotment.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would require a 68% aid boost.

To help finance that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the present 7.5%, but for that to happen, another official guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)