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

Industry individuals looking for phase-in duration anticipate steady intro

Industry deals with technical difficulties and cost concerns

Government financing concerns develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it might curb worldwide palm oil materials, looks increasingly most likely to be carried out slowly, analysts said, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant producer and exporter of palm oil, plans to raise the obligatory 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 push costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the strategy is on track for full launch in the new year, industry watchers state expenses and technical obstacles are likely to lead to partial execution before full adoption across the stretching island chain.

greatest fuel retailer, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to blend and keep B40, which will be finished during a "shift period after government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a meeting with government officials and biodiesel producers last week, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately respond to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be implemented slowly, and that biodiesel producers are prepared to supply the higher mix.

"I have validated the readiness with all manufacturers recently," 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 producers to offer to fuel retailers, which it generally has actually done by this time of the year.

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

The 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the greater mix might also be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required 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 looms.

However, the palm oil industry would challenge a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, 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, handling director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.

"The execution may be slow and progressive 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 attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)