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

Industry individuals seeking phase-in period expect progressive introduction

Industry faces technical difficulties and expense concerns

Government funding concerns occur due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has sustained concerns it might curb global palm oil products, looks increasingly likely to be implemented slowly, experts said, as industry participants seek a phase-in period.

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 set off a jump in palm futures and may pressure costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated repeatedly the strategy is on track for full launch in the new year, market watchers say costs and technical challenges are most likely to lead to partial application before complete adoption across the sprawling archipelago.

Indonesia's biggest fuel seller, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and save B40, which will be completed throughout a "transition duration after government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without offering information.

During a meeting with federal government officials and biodiesel producers recently, fuel merchants asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel merchants' association, did not right away react to a demand for comment.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be executed gradually, which biodiesel producers are all set to provide the greater mix.

"I have verified the readiness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has not provided allowances for manufacturers to offer to sustain merchants, which it usually has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher blend could also be a difficulty as palm oil now costs around $400 per metric heap more than crude oil. Indonesia uses profits from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking is imminent.

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would hurt the market, including palm smallholders.

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

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

"The execution may be slow and gradual 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 required even more 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