Indonesia insists B40 biodiesel implementation to proceed on Jan. 1
Industry participants looking for phase-in period expect steady introduction
Industry deals with technical obstacles and cost issues
Government financing problems develop due to palm oil cost variation
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually sustained concerns it might suppress global palm oil supplies, looks increasingly likely to be executed gradually, analysts stated, as industry individuals seek a phase-in duration.
Indonesia, the world's biggest 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 activated a jump in palm futures and might pressure prices even more in 2025.
While the government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the brand-new year, industry watchers say costs and technical obstacles are likely to lead to partial execution before complete adoption throughout the stretching island chain.
Indonesia's biggest 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 duration after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.
During a meeting with government officials and biodiesel manufacturers recently, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not instantly react to an ask for remark.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be carried out gradually, and that biodiesel manufacturers are ready to supply the greater blend.
"I have validated the readiness with all manufacturers recently," she stated.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has actually not released allowances for manufacturers to sell to sustain retailers, which it normally has done by this time of the year.
"We can't perform without order files, and purchase order files are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments)."
The government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the higher mix could also be an obstacle as palm oil now costs around $400 per metric load more than unrefined oil. Indonesia utilizes proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.
In November, BPDPKS approximated it required a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike impends.
However, the palm oil industry would challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the market, consisting of palm smallholders.
"I think there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the money) originate from?" he stated.
Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, said B40 execution would be challenging in 2025.
"The implementation may be slow and progressive in 2025 and most likely more hectic in 2026," he stated.
Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more 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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