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

Industry participants looking for phase-in period anticipate steady introduction

Industry deals with technical obstacles and cost issues

Government funding concerns emerge due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it could suppress worldwide palm oil supplies, looks significantly most likely to be carried out slowly, experts said, as market 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 triggered a jump in palm futures and might push rates further in 2025.

While the federal government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the new year, say costs and technical difficulties are most likely to lead to partial execution before full adoption throughout the stretching archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it needs to modify some of its fuel terminals to blend and keep B40, which will be finished during a "transition period after federal government develops the mandate", representative Fadjar Djoko Santoso told Reuters, without offering information.

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

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, and that biodiesel producers are prepared to supply the higher blend.

"I have actually confirmed the readiness with all producers recently," she stated.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has not provided allocations for producers to offer to fuel retailers, which it generally has actually done by this time of the year.

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

The federal government plans to designate 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 federal government, moneying the higher blend might also be a difficulty as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

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

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure 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 aid will increase. Where will (the cash) originate from?" he stated.

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

"The execution might be sluggish and steady in 2025 and most likely more busy in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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