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

Industry participants looking for phase-in period expect steady intro

Industry deals with technical challenges and cost concerns

Government funding concerns develop 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 concerns it might curb global palm oil supplies, looks progressively likely to be implemented gradually, experts stated, as industry participants seek a phase-in duration.

Indonesia, the world's greatest manufacturer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a jump in palm futures and might press rates further in 2025.

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

Indonesia's greatest fuel seller, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and keep B40, which will be completed throughout a "shift duration after government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without providing details.

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

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, which biodiesel manufacturers are ready to provide the higher mix.

"I have actually verified the preparedness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the federal government has actually not provided allocations for producers to sell to fuel sellers, which it normally has done by this time of the year.

"We can't perform without purchase order files, and order documents are acquired after we get contracts with fuel business," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allotments)."

The 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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the greater blend could likewise be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes earnings from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost 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 hike impends.

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

"I believe there will be a hold-up, due to the fact that if it is executed, the subsidy will increase. Where will (the money) originate from?" he said.

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

"The implementation might 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 required even more to B50 or B60 to achieve 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.)