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

Industry individuals looking for phase-in period expect steady intro

Industry faces technical obstacles and expense concerns

Government financing issues emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually fuelled issues it could curb worldwide palm oil materials, looks increasingly most likely to be executed gradually, experts stated, as market individuals seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually triggered a dive in palm futures and might push costs further in 2025.

While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the new year, industry watchers say expenses and technical difficulties are most likely to lead to partial application before complete adoption across the sprawling archipelago.

Indonesia's greatest fuel seller, state-owned Pertamina, said it needs to modify a few of its fuel terminals to blend and keep B40, which will be finished throughout a "shift duration after federal government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing details.

During a meeting with federal government authorities and biodiesel producers last week, fuel retailers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be implemented slowly, which biodiesel producers are all set to provide the greater mix.

"I have validated the readiness with all producers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has not released allowances for producers to offer to sustain merchants, which it generally has 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 contracts after the ministerial decree (on biodiesel allotments)."

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

FUNDING CHALLENGES

For the federal government, funding the higher blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than petroleum. Indonesia utilizes profits from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

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

However, the palm oil industry would object to a levy walking, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

"I believe there will be a delay, since if it is executed, the aid will increase. Where will (the cash) come from?" he said.

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.

"The implementation might be sluggish and gradual in 2025 and probably more hectic in 2026," he said.

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