Biodiesel allocation decree was awaited by market

Indonesia had planned to introduce higher biodiesel mix on Jan. 1

Palm oil standard contract rose 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry until completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has been signed," the minister Bahlil Lahadalia informed reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel manufacturers and fuel sellers will be given until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical difficulties linked to aids for the fuel.

The non-implementation on Jan. 1. had actually led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel producers had said they were not able to prepare agreements for without the decree.

The biodiesel allocation for 2025 indicated an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry information revealed on Friday.

Of the overall allowance for this year, 7.55 million KL is for the general public service responsibility (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.

"The staying allotments will be offered at market cost. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the cost gap between the palm oil and fossil fuels for the total allocation.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would need a 68% subsidy increase.

To assist fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, but for that to happen, another main guideline is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati