Biodiesel allowance decree was waited for by market

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

Palm oil criteria contract rose 1% after previous fall

Government intends 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 until completion of next month to adjust to the higher level of the fuel in the mix.

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

"The ministerial guideline has been signed," the minister Bahlil Lahadalia informed reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel sellers will be given till Feb. 28 to adjust to the B40 mix. She stated the hold-up was because of technical difficulties linked to aids for the fuel.

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

Fuel sellers and biodiesel producers had actually said they were not able to prepare agreements for biodiesel circulation without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's approximated 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 public service responsibility (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 allocation is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the price gap in between the palm oil and nonrenewable fuel sources for the overall allotment.

BPDPKS, the agency in charge of collecting and managing the palm oil funds, estimated in November B40 would require a 68% subsidy boost.

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, however for that to take place, another official guideline is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)