Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in period anticipate gradual intro

Industry faces technical difficulties and expense concerns

Government funding concerns develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually sustained issues it might curb worldwide palm oil products, looks significantly likely to be executed slowly, analysts stated, as market individuals look for a phase-in duration.

Indonesia, the world's greatest manufacturer 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 actually set off a jump in palm futures and may pressure rates even more in 2025.

While the federal government of President Prabowo has said consistently the plan is on track for full launch in the new year, market watchers say expenses and technical obstacles are likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and store B40, which will be finished throughout a "transition duration after federal government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a meeting with federal government authorities and biodiesel producers recently, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not immediately react to a request for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be implemented slowly, and that biodiesel manufacturers are prepared to provide the higher blend.

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

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

"We can't provide the items without purchase order documents, and order documents are obtained after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allowances)."

The government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial estimate 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 lot more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed 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 walking is imminent.

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, including palm smallholders.

"I think there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The application may be sluggish and progressive in 2025 and probably more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina