Indonesia insists B40 biodiesel implementation to on Jan. 1
Industry participants seeking phase-in duration anticipate steady intro
Industry faces technical challenges and expense issues
Government funding concerns occur due to palm oil cost variation
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has sustained concerns it could suppress global palm oil materials, looks increasingly likely to be carried out gradually, experts stated, as market participants seek a phase-in period.
Indonesia, the world's most significant manufacturer 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 actually triggered a jump in palm futures and may push rates further in 2025.
While the federal government of President Prabowo Subianto has actually stated consistently the strategy is on track for full launch in the new year, market watchers say expenses and technical obstacles are likely to lead to partial implementation before full adoption across the stretching island chain.
Indonesia's greatest fuel retailer, state-owned Pertamina, said it requires to customize some of its fuel terminals to mix and store B40, which will be finished throughout a "shift period after federal government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without providing information.
During a conference with government authorities and biodiesel producers recently, fuel retailers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not right away react to a request for comment.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out gradually, and that biodiesel producers are all set to supply the higher blend.
"I have verified the preparedness with all producers last week," she said.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the federal government has not provided allocations for manufacturers to sell to fuel sellers, which it generally has done by this time of the year.
"We can't perform without purchase order files, and order documents are gotten after we get contracts with fuel companies," Gunawan told Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allowances)."
The federal government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the higher blend could likewise be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.
In November, BPDPKS approximated it needed a 68% increase 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, said Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the industry, including palm smallholders.
"I think there will be a hold-up, since if it is implemented, the subsidy will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.
"The execution may be sluggish and steady in 2025 and most likely more fast-paced in 2026," he stated.
Prabowo, who took workplace in October, campaigned on a platform to raise the mandate 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
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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