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

Industry individuals looking for phase-in duration anticipate steady introduction

Industry deals with technical obstacles and cost concerns

Government financing problems develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel mandate from Jan. 1, which has actually sustained concerns it could curb worldwide palm oil supplies, looks increasingly most likely to be executed slowly, experts said, as industry individuals seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, plans to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and may press rates even more in 2025.

While the government of President Prabowo Subianto has stated consistently the strategy is on track for complete launch in the brand-new year, market watchers say expenses and technical obstacles are most likely to result in partial application before complete adoption across the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, said it requires to customize some of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without offering information.

During a conference with federal government authorities and biodiesel manufacturers last week, fuel merchants asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.

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

Energy ministry senior official Eniya Listiani Dewi told Reuters the mandate walking would not be executed gradually, which biodiesel manufacturers are prepared to supply the greater blend.

"I have verified the preparedness with all producers recently," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not issued allotments for manufacturers to offer to sustain sellers, which it typically has done by this time of the year.

"We can't provide the goods without purchase order files, and purchase order files are acquired after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign agreements after the ministerial decree (on biodiesel allocations)."

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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher mix might also be a difficulty as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses proceeds from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed 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 walking impends.

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior expert with INDEF, as it would hurt the industry, consisting of palm smallholders.

"I think there will be a delay, because if it is implemented, the subsidy will increase. Where will (the cash) come from?" he stated.

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, stated B40 application would be challenging in 2025.

"The execution may be sluggish and gradual in 2025 and probably more busy in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina