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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry participants seeking phase-in duration anticipate steady intro

Industry faces technical difficulties and cost issues

Government funding concerns develop due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has sustained concerns it could curb worldwide palm oil materials, looks significantly most likely to be executed slowly, experts said, as market individuals seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and may push costs even more in 2025.

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

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and keep B40, which will be finished throughout a "shift period after federal government develops the required", representative Fadjar Djoko Santoso informed Reuters, without offering information.

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

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be executed gradually, and that biodiesel producers are all set to supply the greater blend.

"I have confirmed 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 not for manufacturers to offer to sustain merchants, which it normally has done by this time of the year.

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

The government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend might also be a difficulty as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

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

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I believe there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

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

"The execution may be slow and gradual in 2025 and most likely more fast-paced in 2026," he stated.

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