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

Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry participants looking for phase-in duration anticipate gradual intro

Industry faces technical obstacles and cost concerns

Government financing issues arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it might curb international palm oil materials, looks significantly most likely to be implemented gradually, experts stated, as industry individuals seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and may press prices even more in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the new year, market watchers state costs and technical challenges are most likely to lead to partial execution before full adoption throughout the stretching archipelago.

Indonesia's greatest fuel seller, state-owned Pertamina, stated it requires to customize some of its fuel terminals to mix and keep B40, which will be finished throughout a "transition duration after government develops the required", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with federal government officials and biodiesel manufacturers recently, fuel sellers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, told Reuters.

Hiswana Migas, the fuel sellers' association, did not instantly react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be gradually, which biodiesel producers are ready to provide the greater mix.

"I have verified 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 government has actually not released allotments for manufacturers to offer to sustain retailers, which it typically has actually done by this time of the year.

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

The government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher mix could also be a difficulty as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

However, the palm oil industry would challenge a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, including palm smallholders.

"I believe there will be a hold-up, due to the fact that if it is implemented, the aid will increase. Where will (the cash) come from?" he said.

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

"The application might be slow and steady in 2025 and probably more busy in 2026," he said.

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