Biodiesel allocation decree was awaited by industry

Indonesia had actually prepared to launch greater biodiesel mix on Jan. 1

Palm oil standard agreement increased 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska 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 giving the market up until completion of next month to adjust to the higher level of the fuel in the mix.

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

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia told reporters, including the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel sellers will be provided until Feb. 28 to adjust to the B40 mix. She said the delay was since of technical challenges linked to aids for the fuel.

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

Fuel retailers and biodiesel producers had said they were unable to draw up contracts for biodiesel distribution without the decree.

The biodiesel allotment for 2025 indicated an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

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

"The remaining allotments will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the cost space in between the palm oil and nonrenewable fuel sources for the overall allowance.

BPDPKS, the firm in charge of collecting and managing the palm oil funds, estimated in November B40 would require a 68% subsidy boost.

To assist fund that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to occur, another main regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)