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

Industry individuals looking for phase-in duration expect progressive introduction

Industry deals with technical difficulties and cost concerns

Government financing concerns emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks significantly likely to be implemented gradually, experts stated, as industry participants look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a dive in palm futures and might push costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, industry watchers say expenses and technical challenges are most likely to lead to partial application before full adoption across the stretching island chain.

Indonesia's most significant fuel merchant, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and keep B40, which will be finished during a "transition period after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing details.

During a conference with government authorities and biodiesel manufacturers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be implemented slowly, and that biodiesel manufacturers are ready to supply the greater blend.

"I have verified the readiness with all producers last week," she said.

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

"We can't perform without order files, and purchase order files are acquired after we get agreements with fuel business," Gunawan informed Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allocations)."

The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, moneying the higher blend could likewise be an obstacle as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% boost 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 is imminent.

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

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

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

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

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)