Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry participants seeking phase-in period expect progressive intro

Industry faces technical difficulties and expense issues

Government financing problems due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained issues it might curb global palm oil supplies, looks progressively likely to be carried out slowly, analysts said, as industry individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a dive in palm futures and might press costs even more in 2025.

While the government of President Prabowo Subianto has actually stated repeatedly the plan is on track for complete launch in the new year, market watchers say costs and technical obstacles are most likely to result in partial application before complete adoption across the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and save B40, which will be completed during a "shift duration after federal government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

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

Hiswana Migas, the fuel retailers' association, did not immediately react to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, and that biodiesel producers are prepared to provide the higher blend.

"I have validated the readiness with all manufacturers 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 provided allowances for manufacturers to offer to sustain sellers, which it usually has actually done by this time of the year.

"We can't perform without purchase order files, and order files are acquired after we get agreements with fuel business," Gunawan informed Reuters. "Fuel business can only sign agreements 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 preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the greater mix might likewise be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses profits from palm oil export levies, handled by a firm 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 hike impends.

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 industry, including palm smallholders.

"I believe there will be a hold-up, since if it is implemented, the aid will increase. Where will (the money) come from?" he said.

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

"The application may be slow and gradual in 2025 and most likely more busy in 2026," he stated.

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