Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals seeking phase-in period anticipate gradual introduction

Industry deals with technical obstacles and expense issues

Government financing problems develop due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil supplies, looks increasingly most likely to be executed slowly, analysts stated, as market individuals look for a phase-in period.

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

While the government of President Prabowo Subianto has said consistently the plan is on track for complete launch in the new year, industry watchers state costs and technical obstacles are most likely to result in partial implementation before complete adoption across the stretching archipelago.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it needs to modify some of its fuel terminals to blend and save B40, which will be completed throughout a "shift period after government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with government authorities and biodiesel manufacturers recently, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who in participation, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not instantly respond to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be carried out gradually, which biodiesel manufacturers are prepared to supply the greater blend.

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

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

"We can't deliver the items without purchase order documents, and purchase order documents are gotten after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel companies can only sign agreements 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix could likewise be a difficulty as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses earnings from palm oil export levies, managed 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 approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy walking impends.

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

"I think there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

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

"The implementation may be slow and progressive in 2025 and most likely more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required 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; Editing by Tony Munroe and Lincoln Feast.)