Indonesia insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period anticipate steady introduction

Industry deals with technical obstacles and expense concerns

Government financing issues occur due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it might suppress international palm oil products, looks significantly likely to be carried out gradually, experts said, as market individuals look for a phase-in period.

Indonesia, the world's greatest 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 actually triggered a jump in palm futures and may pressure rates further in 2025.

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

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and store B40, which will be completed throughout a "transition duration after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with federal government authorities and biodiesel manufacturers last week, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, told .

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be executed slowly, and that biodiesel manufacturers are prepared to supply the greater mix.

"I have actually confirmed the preparedness with all producers recently," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has actually not provided allotments for manufacturers to offer to sustain retailers, which it generally has done by this time of the year.

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

The government prepares 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 government, funding the higher mix could also be a difficulty as palm oil now costs around $400 per metric ton more than crude oil. Indonesia utilizes earnings from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.

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

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

"I think there will be a delay, because if it is carried out, the aid will increase. Where will (the cash) come from?" he stated.

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

"The application might be sluggish and progressive in 2025 and most likely more hectic 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 attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina