Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia insists B40 biodiesel implementation to continue on Jan. 1
Industry individuals seeking phase-in period expect gradual intro
Industry deals with technical challenges and cost concerns
Government funding issues 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 fuelled concerns it could suppress international palm oil products, looks increasingly likely to be executed slowly, said, as market individuals seek a phase-in duration.
Indonesia, the world's biggest producer and exporter of palm oil, prepares to raise the obligatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a jump in palm futures and might push rates further in 2025.
While the government of President Prabowo Subianto has said consistently the strategy is on track for full launch in the new year, industry watchers state costs and technical difficulties are most likely to result in partial application before full adoption throughout the stretching archipelago.
Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to mix and save B40, which will be completed during a "transition period after government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.
During a conference with federal government authorities and biodiesel producers last week, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, told Reuters.
Hiswana Migas, the fuel sellers' association, did not instantly react to an ask for comment.
Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, and that biodiesel manufacturers are prepared to supply the higher mix.
"I have actually validated the preparedness with all manufacturers last week," she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has not provided allotments for manufacturers to sell to fuel sellers, which it typically has actually done by this time of the year.
"We can't perform without purchase order documents, and purchase order files are acquired after we get agreements with fuel business," Gunawan informed Reuters. "Fuel companies can only sign contracts 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 preliminary estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, moneying the greater blend might also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.
In November, BPDPKS estimated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.
However, the palm oil market would object to a levy hike, 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 delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) come from?" he stated.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 application would be challenging in 2025.
"The implementation may be sluggish and gradual in 2025 and probably more busy in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the required even more 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; Editing by Tony Munroe and Lincoln Feast.)