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

Industry participants seeking phase-in period anticipate gradual intro

Industry deals with technical challenges and expense concerns

Government financing issues arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel required from Jan. 1, which has actually fuelled concerns it might curb international palm oil materials, looks progressively likely to be executed gradually, analysts stated, as market individuals seek a phase-in duration.

Indonesia, the world's biggest manufacturer 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 actually triggered a jump in palm futures and might pressure rates further in 2025.

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

Indonesia's most significant fuel seller, state-owned Pertamina, said it requires to customize some of its fuel terminals to blend and store B40, which will be completed throughout a "shift period after federal government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel producers recently, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, told Reuters.

Hiswana Migas, the fuel retailers' association, did not instantly react to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required hike would not be executed slowly, and that biodiesel producers are ready to provide the higher mix.

"I have actually verified the preparedness with all manufacturers last week," she said.

APROBI, whose members make fatty acid (FAME) from palm oil to be blended with diesel fuel, said the federal government has not released allotments for producers to sell to sustain sellers, which it typically has done by this time of the year.

"We can't deliver the products without purchase order documents, and purchase order files are obtained after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can only sign contracts after the ministerial decree (on biodiesel allowances)."

The federal government plans to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its preliminary price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend might also be a difficulty as palm oil now costs around $400 per metric heap more than crude oil. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% boost 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 looms.

However, the palm oil market would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

"I think there will be a hold-up, 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 commodity consultancy, said B40 implementation would be challenging in 2025.

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

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)