Indonesia firmly insists B40 biodiesel implementation to proceed on Jan. 1
Industry individuals looking for phase-in period expect progressive intro
Industry faces technical obstacles and cost issues
Government financing issues emerge due to palm oil price disparity
JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress global palm oil supplies, looks significantly likely to be carried out slowly, experts said, as industry participants seek a phase-in period.
Indonesia, the world's greatest 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 federal government of President Prabowo Subianto has said repeatedly the strategy is on track for complete launch in the new year, industry watchers state costs and technical challenges are most likely to result in partial execution before full adoption across the sprawling archipelago.
Indonesia's greatest fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and keep B40, which will be finished during a "transition period after government develops the mandate", representative Fadjar informed Reuters, without offering details.
During a conference with federal government authorities and biodiesel producers recently, fuel merchants requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.
Hiswana Migas, the fuel sellers' association, did not right away react to an ask for comment.
Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be executed gradually, and that biodiesel producers are all set to provide the higher blend.
"I have actually verified the preparedness with all manufacturers last week," she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be mixed with diesel fuel, said the government has actually not issued allotments for manufacturers to sell to sustain sellers, which it generally has actually done by this time of the year.
"We can't perform without order files, and order documents are obtained after we get contracts with fuel business," Gunawan told Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allotments)."
The government plans to allocate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the higher mix could likewise be an obstacle as palm oil now costs around $400 per metric heap more than crude oil. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.
In November, BPDPKS estimated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike is impending.
However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, including palm smallholders.
"I believe there will be a hold-up, since if it is executed, the aid will increase. Where will (the cash) come from?" he said.
Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, stated B40 implementation would be challenging in 2025.
"The application may be sluggish and steady 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 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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