Indonesia insists B40 biodiesel application to continue on Jan. 1
Industry individuals seeking phase-in duration expect gradual intro
Industry deals with technical obstacles and expense concerns
Government financing concerns emerge due to palm oil rate variation
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it could curb international palm oil supplies, looks progressively likely to be carried out slowly, experts stated, as market participants seek a phase-in duration.
Indonesia, the world's most significant 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 set off a jump in palm futures and may press rates even more in 2025.
While the federal government of President Prabowo Subianto has said consistently the strategy is on track for full launch in the new year, market watchers state expenses and technical challenges are most likely to result in partial implementation before complete adoption throughout the sprawling archipelago.
Indonesia's greatest fuel seller, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and store B40, which will be finished throughout a "transition period after federal government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.
During a conference with government authorities and biodiesel producers recently, fuel retailers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not immediately react to an ask for remark.
Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be implemented slowly, which biodiesel manufacturers are ready to supply the greater mix.
"I have verified the preparedness with all producers last week," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has actually not issued allocations for producers to offer to fuel merchants, which it usually has done by this time of the year.
"We can't deliver the goods without purchase order documents, and order files are acquired after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."
The federal government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary quote of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the higher mix might also be a difficulty as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.
In November, BPDPKS estimated 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 is imminent.
However, the palm oil market would object to a levy hike, said 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 delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, said B40 execution would be challenging in 2025.
"The execution might be sluggish and progressive in 2025 and probably more busy in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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.)
