Indonesia firmly insists B40 biodiesel application to continue on Jan. 1
Industry individuals seeking phase-in duration expect gradual intro
Industry deals with technical challenges and expense issues
Government funding issues develop due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might curb global palm oil supplies, looks increasingly most likely to be implemented gradually, experts stated, as industry participants look for a phase-in duration.
Indonesia, the world's most significant producer 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 activated a dive in palm futures and might push rates further in 2025.
While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the new year, market watchers state expenses and technical challenges are likely to result in partial application before full adoption throughout the sprawling archipelago.
Indonesia's greatest fuel merchant, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and store B40, which will be completed during a "transition period after federal government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.
During a meeting with government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not immediately respond to an ask for comment.
Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be implemented gradually, which biodiesel producers are prepared to supply the higher blend.
"I have confirmed the readiness with all producers recently," she stated.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has not released allowances for producers to offer to fuel retailers, which it generally has done by this time of the year.
"We can't perform without order files, and order files are gotten after we get agreements with fuel business," Gunawan informed Reuters. "Fuel business can only sign agreements 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 estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, moneying the greater mix could likewise be an obstacle as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.
In November, BPDPKS approximated it needed a 68% boost in aids 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 impends.
However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the industry, consisting of palm smallholders.
"I believe there will be a hold-up, because if it is carried out, the subsidy will increase. Where will (the cash) originate 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 slow and progressive in 2025 and probably more fast-paced in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the required even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)
