Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry individuals seeking phase-in period anticipate steady introduction

Industry deals with technical challenges and cost concerns

Government financing concerns develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually sustained issues it could curb worldwide palm oil supplies, looks increasingly likely to be executed gradually, experts said, as industry participants look for a phase-in period.

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

While the federal government of President Prabowo Subianto has actually said consistently the plan is on track for full launch in the new year, industry watchers state costs and technical obstacles are most likely to result in partial implementation before complete adoption across the sprawling island chain.

Indonesia's most significant fuel merchant, state-owned Pertamina, said it needs to modify some of its fuel terminals to blend and save B40, which will be completed throughout a "shift period after federal government establishes the mandate", representative Fadjar Djoko Santoso informed Reuters, without providing information.

During a meeting with federal government officials and biodiesel manufacturers last week, fuel retailers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out gradually, and that biodiesel producers are all set to provide the greater blend.

"I have actually validated the preparedness with all producers recently," she stated.

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

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

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

FUNDING CHALLENGES

For the government, moneying the greater mix 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, managed by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% boost in subsidies 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 impending.

However, the palm oil industry would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, consisting of palm smallholders.

"I believe there will be a delay, because if it is executed, the subsidy will increase. Where will (the cash) originate from?" he stated.

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

"The implementation may be sluggish and steady in 2025 and probably more busy 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 attain energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina