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

Industry individuals looking for phase-in duration expect steady introduction

Industry faces technical difficulties and cost concerns

Government financing concerns emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has actually sustained issues it could curb global palm oil materials, looks progressively most likely to be implemented slowly, analysts stated, as market individuals look for a phase-in period.

Indonesia, the world's biggest producer and exporter 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 jump in palm futures and might press prices further in 2025.

While the government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, market watchers say costs and technical difficulties are most likely to lead to partial execution before full adoption throughout the sprawling island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and save B40, which will be completed during a "shift period after government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without providing information.

During a meeting with federal government officials 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, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not immediately react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be executed slowly, which biodiesel producers are ready to provide the greater mix.

"I have actually validated the readiness with all manufacturers recently," she stated.

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

"We can't deliver the goods without purchase order documents, and purchase order documents are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can just sign agreements 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 told Reuters, less than its preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater mix could also be a difficulty as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.

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

"I think there will be a delay, since if it is executed, the aid will increase. Where will (the cash) originate from?" he said.

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

"The execution may be slow and progressive in 2025 and most likely more hectic in 2026," he said.

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