Biodiesel allocation decree was waited for by market

Indonesia had actually planned to launch greater biodiesel mix on Jan. 1

Palm oil criteria agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market till the end of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to introduce the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has been signed," the minister Bahlil Lahadalia told press reporters, including the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel will be provided up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was due to the fact that of technical obstacles linked to aids for the fuel.

The non-implementation on Jan. 1. had actually resulted in a 2.6% drop in the Malaysian palm oil benchmark agreement on Thursday. On Friday, it recovered by around 1%.

Fuel sellers and biodiesel manufacturers had said they were not able to prepare contracts for biodiesel distribution without the decree.

The biodiesel allowance for 2025 indicated a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

Of the total allowance for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be cost market value. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the cost gap in between the palm oil and nonrenewable fuel sources for the general allowance.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would need a 68% subsidy boost.

To help fund that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the existing 7.5%, but for that to happen, another main regulation is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)