Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants looking for phase-in period anticipate progressive intro

Industry deals with technical obstacles and cost issues

Government funding issues develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it might suppress international palm oil materials, looks progressively likely to be implemented gradually, experts stated, as industry individuals look for a phase-in duration.

Indonesia, the world's most significant producer 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 set off a jump in palm futures and might press rates further in 2025.

While the government of President Prabowo Subianto has stated consistently the strategy is on track for full launch in the new year, industry watchers say expenses and technical difficulties are most likely to result in partial application before full adoption throughout the sprawling island chain.

Indonesia's biggest fuel retailer, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and store B40, which will be completed throughout a "shift period after federal government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a conference with government officials and biodiesel producers last week, requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be executed gradually, and that biodiesel producers are prepared to supply the greater mix.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the federal government has actually not issued allowances for manufacturers to offer to sustain sellers, which it normally has actually done by this time of the year.

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

The federal government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix might also be a challenge 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 estimated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike impends.

However, the palm oil market would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.

"I believe there will be a hold-up, because if it is executed, the aid will increase. Where will (the money) come from?" he said.

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

"The application might be sluggish and steady in 2025 and most likely more fast-paced in 2026," he stated.

Prabowo, who took workplace 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; Editing by Tony Munroe and Lincoln Feast.)