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

Indonesia firmly insists B40 biodiesel execution to continue on Jan. 1

Industry participants looking for phase-in duration anticipate steady introduction

Industry deals with technical obstacles and cost issues

Government financing concerns develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has sustained issues it might suppress global palm oil materials, looks increasingly most likely to be carried out gradually, experts said, as industry individuals look for 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 and may pressure rates even more in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the brand-new year, industry watchers state costs and technical difficulties are most likely to result in partial application before full adoption across the stretching island chain.

Indonesia's greatest fuel seller, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and keep B40, which will be completed throughout a "transition period after government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

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

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

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be executed slowly, which biodiesel manufacturers are ready to supply the higher mix.

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

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

"We can't provide the products without order documents, and order documents are gotten after we get contracts with fuel companies," Gunawan told Reuters. "Fuel business can just sign agreements after the ministerial decree (on biodiesel allotments)."

The federal government prepares to designate 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the greater blend could also be a challenge as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia uses proceeds from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

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 hike impends.

However, the palm oil industry would challenge a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the industry, including palm smallholders.

"I believe there will be a hold-up, due to the fact that if it is executed, the subsidy will increase. Where will (the cash) originate from?" he stated.

Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, stated B40 implementation would be challenging in 2025.

"The application may be sluggish and progressive in 2025 and probably more fast-paced in 2026," he said.

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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina