Indonesia firmly insists B40 to continue on Jan. 1

Industry individuals looking for phase-in duration anticipate steady introduction

Industry faces technical obstacles and expense issues

Government funding issues emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has actually fuelled issues it could curb international palm oil supplies, looks significantly likely to be implemented gradually, analysts said, as industry participants seek a phase-in period.

Indonesia, the world's greatest 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 triggered a dive in palm futures and may press costs further in 2025.

While the government of President Prabowo Subianto has actually said repeatedly the strategy is on track for full launch in the new year, industry watchers say expenses and technical difficulties are most likely to result in partial application before complete adoption throughout the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it requires to customize some of its fuel terminals to blend and save B40, which will be finished during a "shift period after government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without supplying details.

During a conference with federal government officials and biodiesel manufacturers last week, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate hike would not be executed slowly, and that biodiesel producers are prepared to supply the greater mix.

"I have actually confirmed the preparedness with all manufacturers last week," she said.

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

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

The 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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the greater blend might also be an obstacle as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% increase in aids to 47 trillion rupiah ($2.93 billion) next year and estimated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.

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

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

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

"The application may be slow and progressive in 2025 and probably 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina