Biodiesel allowance decree was awaited by industry

Indonesia had planned to introduce higher biodiesel mix on Jan. 1

Palm oil standard contract increased 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while providing the market till completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to launch the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has been signed," the minister Bahlil Lahadalia informed reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel sellers will be offered up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was because of technical difficulties linked to subsidies for the fuel.

The non-implementation on Jan. 1. had caused a 2.6% drop in the Malaysian palm oil benchmark agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel manufacturers had actually stated they were not able to draw up agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 indicated a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry information showed on Friday.

Of the total allocation for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the country's palm oil fund.

"The remaining allotments will be sold at market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the rate space in between the palm oil and fossil fuels for the overall allocation.

BPDPKS, the company in charge of gathering and managing the palm oil funds, approximated in November B40 would need a 68% aid increase.

To help fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, however for that to take place, another main guideline is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)