Indonesia firmly insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in duration anticipate gradual introduction

Industry faces technical difficulties and expense concerns

Government financing problems emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled issues it might suppress global palm oil supplies, looks increasingly most likely to be implemented gradually, experts stated, as industry participants seek a phase-in period.

Indonesia, the world's most significant producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and may press costs further in 2025.

While the government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical obstacles are most likely to result in partial implementation before full adoption throughout the stretching archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, said it requires to customize some of its fuel terminals to blend and store B40, which will be completed throughout a "shift period after federal government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel producers recently, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, told Reuters.

Hiswana Migas, the fuel sellers' association, did not instantly respond to an ask for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be implemented gradually, which biodiesel producers are prepared to supply the higher blend.

"I have verified the preparedness with all producers last week," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has not provided allotments for producers to offer to fuel merchants, which it usually has done by this time of the year.

"We can't provide the goods without purchase order files, and order documents are obtained after we get agreements with fuel business," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allotments)."

The federal government plans to allocate 15.62 million (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 federal government, moneying the greater mix might likewise be an obstacle as palm oil now costs around $400 per metric load more than crude oil. Indonesia uses proceeds from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike impends.

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

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

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

"The execution might be sluggish and gradual in 2025 and probably more fast-paced in 2026," he stated.

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