Indonesia firmly insists B40 biodiesel application to continue on Jan. 1

Industry individuals looking for phase-in duration anticipate gradual intro

Industry deals with technical obstacles and cost concerns

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it could curb worldwide palm oil supplies, looks significantly most likely to be implemented gradually, experts said, as market individuals look for a phase-in period.

Indonesia, the world's most significant manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and may pressure rates further in 2025.

While the government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the new year, market watchers state expenses and technical difficulties are most likely to result in partial application before complete adoption across the stretching archipelago.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and store B40, which will be finished throughout a "transition period after federal government develops the required", representative Fadjar Djoko Santoso told Reuters, without offering information.

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

Hiswana Migas, the fuel retailers' association, did not instantly react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out slowly, and that biodiesel producers are prepared to provide the greater mix.

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

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

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

The government plans to 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher blend might likewise 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 an agency called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I think there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the money) come from?" he stated.

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

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

Prabowo, who took workplace 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina