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

Industry participants looking for phase-in period expect gradual introduction

Industry faces technical challenges and expense concerns

Government funding concerns develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it could curb global palm oil products, looks progressively likely to be executed gradually, experts stated, as market participants look for a phase-in period.

Indonesia, the world's most significant manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a jump in palm futures and may press prices even more in 2025.

While the government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for complete launch in the new year, industry watchers state expenses and technical difficulties are most likely to lead to partial execution before full adoption across the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and save B40, which will be completed during a "transition period after government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with government officials and biodiesel producers last week, fuel sellers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, told Reuters.

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

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

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

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

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

The federal government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher mix could also be a challenge as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses profits from palm oil export levies, handled by a company called BPDPKS, to cover such gaps.

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

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

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

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

"The execution might be slow and gradual in 2025 and most likely more fast-paced in 2026," he stated.

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