Indonesia firmly insists B40 biodiesel implementation to proceed on Jan. 1
Industry individuals looking for phase-in period expect progressive introduction
Industry deals with technical challenges and expense concerns
Government financing issues develop due to palm oil cost variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress international palm oil products, looks significantly most likely to be gradually, experts said, as market participants seek a phase-in period.
Indonesia, the world's greatest producer 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 actually activated a jump in palm futures and might push costs even more in 2025.
While the government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the new year, market watchers state expenses and technical challenges are likely to lead to partial implementation before full adoption across the sprawling island chain.
Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and save B40, which will be finished throughout a "shift period after government develops the required", representative Fadjar Djoko Santoso told Reuters, without supplying information.
During a meeting with federal government officials and biodiesel producers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.
Hiswana Migas, the fuel sellers' association, did not instantly react to a request for remark.
Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be carried out gradually, which biodiesel manufacturers are prepared to supply the greater blend.
"I have confirmed the preparedness with all producers recently," she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has not issued allotments for manufacturers to offer to fuel retailers, which it normally has done by this time of the year.
"We can't perform without order documents, and order documents are obtained after we get contracts with fuel business," Gunawan informed Reuters. "Fuel companies can only sign agreements after the ministerial decree (on biodiesel allowances)."
The government prepares to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the greater mix might likewise be an obstacle as palm oil now costs around $400 per metric load 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% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.
However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, including palm smallholders.
"I think there will be a hold-up, since if it is carried out, the aid will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.
"The execution might be sluggish and gradual in 2025 and probably more busy in 2026," he stated.
Prabowo, who took office in October, campaigned on a platform to raise the required further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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