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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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

Industry individuals seeking phase-in period anticipate progressive intro

Industry deals with technical obstacles and cost issues

Government funding problems 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 sustained concerns it might curb global palm oil materials, looks increasingly likely to be carried out slowly, experts said, as industry participants seek a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually activated a dive in palm futures and might pressure prices even more in 2025.

While the federal government of President Prabowo Subianto has stated consistently the strategy is on track for complete launch in the new year, market watchers state costs and technical obstacles are most likely to result in partial application before complete adoption throughout the stretching archipelago.

Indonesia's most significant fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to mix and save B40, which will be finished during a "transition duration after government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with government officials and biodiesel producers last week, fuel retailers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a request for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be implemented slowly, and that biodiesel producers are all set to supply the higher blend.

"I have validated the readiness with all manufacturers recently," she stated.

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

"We can't perform without purchase order documents, and order documents are obtained after we get contracts with fuel companies," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allowances)."

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 federal government, moneying the greater mix could likewise be a challenge as now costs around $400 per metric load more than petroleum. Indonesia uses profits from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% increase 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 looms.

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

"I think there will be a delay, due to the fact that if it is executed, the aid will increase. Where will (the cash) originate from?" he said.

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

"The application might be sluggish and progressive in 2025 and most likely more fast-paced in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further 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