Agro Diesel (India) Private Ltd

Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry individuals looking for phase-in period expect steady introduction

Industry deals with technical challenges and cost concerns

Government funding issues develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) – Indonesia’s plan to broaden its biodiesel required from Jan. 1, which has sustained issues it could suppress global palm oil products, looks significantly likely to be implemented gradually, experts said, as industry participants seek a phase-in period.

Indonesia, the world’s greatest producer and of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has triggered a dive in palm futures and may press prices even more in 2025.

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

Indonesia’s biggest fuel merchant, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and keep B40, which will be finished during a “shift period after federal government develops the required”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.

During a meeting with government authorities and biodiesel manufacturers last week, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, told Reuters.

Hiswana Migas, the fuel merchants’ association, did not right away react to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be carried out gradually, which biodiesel manufacturers are all set to supply the greater mix.

“I have actually validated the preparedness with all manufacturers recently,” she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not released allocations for manufacturers to sell to fuel merchants, which it normally has done by this time of the year.

“We can’t deliver the products without purchase order files, and order files are obtained after we get agreements with fuel business,” Gunawan told Reuters. “Fuel business can only sign agreements after the ministerial decree (on biodiesel allowances).”

The government plans to assign 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 government, funding the greater blend might likewise be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it required a 68% increase in subsidies 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 is imminent.

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

“I believe there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the money) originate from?” he said.

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

“The execution might be slow and steady in 2025 and probably more busy in 2026,” he said.

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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)