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

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in duration expect progressive introduction

Industry deals with technical difficulties and expense concerns

Government financing problems develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) strategy to broaden its biodiesel required from Jan. 1, which has fuelled concerns it might curb international palm oil materials, looks progressively most likely to be executed slowly, experts said, as market participants seek a phase-in period.

Indonesia, the world's most significant manufacturer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and might push costs even more in 2025.

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

Indonesia's greatest fuel merchant, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and store B40, which will be completed during a "transition duration after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without supplying information.

During a meeting with federal government authorities and biodiesel producers recently, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in attendance, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate walking would not be implemented slowly, which biodiesel producers are all set to supply the greater mix.

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

APROBI, whose members make fat methyl ester (FAME) from palm oil to be mixed with diesel fuel, stated the government has not released allocations for manufacturers to sell to sustain merchants, which it normally has actually done by this time of the year.

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

The federal government prepares to designate 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, funding the higher blend might likewise be an obstacle as palm oil now costs around $400 per metric heap more than petroleum. Indonesia uses profits from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

In November, BPDPKS estimated it needed a 68% boost in aids 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 is impending.

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

"I think there will be a hold-up, since if it is implemented, the aid will increase. Where will (the cash) originate from?" he stated.

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

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

Prabowo, who took workplace in October, campaigned on a platform to raise the required 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