Indonesia insists B40 biodiesel implementation to continue on Jan. 1

Industry individuals seeking phase-in period anticipate steady intro

Industry faces technical difficulties and cost issues

Government financing problems emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually sustained issues it could suppress global palm oil materials, looks progressively likely to be executed slowly, said, as industry participants look for a phase-in period.

Indonesia, the world's greatest manufacturer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and might push prices even more in 2025.

While the government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the new year, industry watchers state expenses and technical challenges are most likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to mix and keep B40, which will be finished throughout a "transition duration after government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with federal government authorities and biodiesel producers last week, fuel merchants requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be executed gradually, which biodiesel producers are all set to provide the higher blend.

"I have actually verified the preparedness with all producers recently," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the government has not provided allowances for manufacturers to offer to sustain sellers, which it typically has done by this time of the year.

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

The government plans to designate 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, funding the higher blend might also be an obstacle as palm oil now costs around $400 per metric heap more than crude oil. Indonesia uses proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in aids 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 is impending.

However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the market, consisting of palm smallholders.

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

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

"The implementation may be slow and progressive in 2025 and probably more fast-paced in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the required further to B50 or B60 to accomplish 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.)