m2-capital-sdn.-bhd

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

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

Industry participants seeking phase-in duration anticipate gradual introduction

Industry faces technical challenges and cost concerns

Government financing concerns arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it could curb global palm oil materials, looks increasingly most likely to be executed slowly, experts stated, as industry participants seek a phase-in period.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a jump in palm futures and may pressure rates further in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the brand-new year, market watchers state expenses and technical obstacles are likely to lead to partial implementation before complete adoption throughout the sprawling island chain.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be finished during a "transition period after federal government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.

During a conference with government officials and biodiesel producers recently, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not right away react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be carried out gradually, and that biodiesel producers are all set to provide the greater mix.

"I have validated the readiness with all manufacturers recently," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the federal government has actually not released allotments for manufacturers to sell to fuel sellers, which it usually has actually done by this time of the year.

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

The federal government prepares to assign 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 government, moneying the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric heap more than crude oil. Indonesia utilizes earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% increase in subsidies 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 market would challenge a levy walking, Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

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

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

"The execution may be slow and gradual in 2025 and probably more busy in 2026," he said.

Prabowo, who took workplace 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina