Indonesia firmly insists B40 biodiesel implementation to on Jan. 1

Industry participants seeking phase-in period anticipate progressive introduction

Industry faces technical difficulties and expense concerns

Government financing issues occur due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might curb international palm oil materials, looks progressively most likely to be carried out gradually, analysts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant 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 actually triggered a dive in palm futures and might push prices even more in 2025.

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

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and keep B40, which will be finished throughout a "shift period after government establishes the required", representative Fadjar Djoko Santoso told Reuters, without supplying details.

During a meeting with federal government officials and biodiesel producers last week, fuel sellers requested a two-month shift duration, 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 demand for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be implemented gradually, and that biodiesel producers are all set to provide the greater mix.

"I have validated the readiness with all manufacturers last week," she said.

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

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

The federal government plans 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, funding the higher blend could likewise be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated 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 object to a levy hike, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I believe there will be a hold-up, since if it is implemented, the subsidy will increase. Where will (the cash) come from?" he said.

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

"The application may be slow and progressive in 2025 and most likely more busy in 2026," he said.

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