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

Industry participants looking for phase-in duration expect steady introduction

Industry deals with technical obstacles and expense concerns

Government financing concerns develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress global palm oil products, looks significantly likely to be carried out gradually, experts said, as industry individuals look for a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a jump in palm futures and may pressure prices even more in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the strategy is on track for complete launch in the brand-new year, industry watchers say expenses and technical obstacles are likely to lead to partial implementation before complete adoption across the sprawling archipelago.

Indonesia's greatest fuel retailer, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to mix and keep B40, which will be finished throughout a "transition duration after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel producers recently, fuel merchants requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.

Hiswana Migas, the fuel sellers' association, did not immediately respond to a request for comment.

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

"I have verified the preparedness with all producers recently," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has not provided allotments for manufacturers to sell to fuel retailers, which it typically has actually done by this time of the year.

"We can't provide the products without purchase order documents, and purchase order files are gotten after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allotments)."

The federal government plans to designate 15.62 million (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 higher blend could also be an obstacle as palm oil now costs around $400 per metric load more than crude oil. Indonesia uses profits from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it needed 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 walking impends.

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

"I think there will be a hold-up, since if it is executed, the aid will increase. Where will (the money) come from?" he said.

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

"The execution may be sluggish 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 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