Biodiesel allotment decree was waited for by industry

Indonesia had actually prepared to introduce higher biodiesel mix on Jan. 1

Palm oil benchmark agreement rose 1% after previous fall

Government aims 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while providing the industry until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to launch 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 told reporters, including the government was working to increase the necessary to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel sellers will be provided till Feb. 28 to adjust to the B40 mix. She said the delay was because of technical obstacles linked to aids for the fuel.

The non-implementation on Jan. 1. had resulted in a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had actually stated they were not able to draw up agreements for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry data showed on Friday.

Of the total allotment for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the country's palm oil fund.

"The staying allowances will be cost market value. The non-PSO allocation is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the total allotment.

BPDPKS, the firm in charge of gathering and handling the palm oil funds, approximated in November B40 would require a 68% subsidy increase.

To help fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, but for that to take place, another main regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)