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

Industry participants seeking phase-in duration expect progressive intro

Industry deals with technical difficulties and cost issues

Government funding concerns develop due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks significantly likely to be executed gradually, experts stated, as market individuals seek a phase-in duration.

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

While the government of President Prabowo Subianto has actually said consistently the strategy is on track for complete launch in the new year, market watchers say costs and technical challenges are likely to lead to partial implementation before full adoption throughout the sprawling island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it needs to modify a few of its fuel terminals to mix and save B40, which will be completed throughout a "shift period after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

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

Hiswana Migas, the fuel merchants' association, did not right away react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be carried out gradually, which biodiesel manufacturers are all set to provide the higher mix.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not provided allowances for manufacturers to sell to sustain merchants, which it typically has actually done by this time of the year.

"We can't deliver the products without order documents, and purchase order documents are obtained after we get contracts with fuel business," Gunawan informed Reuters. "Fuel companies can only sign contracts after the ministerial decree (on biodiesel allocations)."

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 preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher mix 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 required 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 hike looms.

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

"I believe there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.

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

"The implementation might be slow and steady in 2025 and probably more hectic in 2026," he said.

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