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Biodiesel allotment decree was waited for by market

Indonesia had prepared to release higher biodiesel mix on Jan. 1

Palm oil standard agreement rose 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the industry till completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has been signed," the minister Bahlil Lahadalia informed reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel merchants will be provided till Feb. 28 to adjust to the B40 mix. She said the hold-up was because of technical obstacles connected to subsidies for the fuel.

The non-implementation on Jan. 1. had resulted in a 2.6% drop in the Malaysian palm oil benchmark agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel manufacturers had stated they were unable to prepare contracts for biodiesel circulation without the decree.

The biodiesel allotment for 2025 showed an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry data revealed on Friday.

Of the total allotment for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as public transport, whose sales will be subsidised by the oil fund.

"The staying allocations will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, including the fund might not subsidise the cost space between the palm oil and nonrenewable fuel sources for the general allotment.

BPDPKS, the agency in charge of gathering and handling the palm oil funds, estimated in November B40 would need a 68% subsidy boost.

To assist finance that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the existing 7.5%, but for that to happen, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)