Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia insists B40 biodiesel implementation to continue on Jan. 1
Industry participants seeking phase-in period expect gradual introduction
faces technical obstacles and cost concerns
Government funding issues develop due to palm oil price variation
JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has actually sustained concerns it could curb global palm oil materials, looks significantly likely to be executed slowly, experts stated, as industry participants look for a phase-in duration.
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 set off a jump in palm futures and may push prices further in 2025.
While the federal government of President Prabowo Subianto has actually said consistently the plan is on track for full launch in the new year, market watchers say costs and technical obstacles are most likely to result in partial implementation before full adoption across the stretching island chain.
Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to modify a few of its fuel terminals to mix and keep B40, which will be completed throughout a "shift duration after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.
During a meeting with government authorities and biodiesel producers recently, fuel sellers asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in participation, informed Reuters.
Hiswana Migas, the fuel merchants' association, did not instantly react to a demand for comment.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out gradually, and that biodiesel manufacturers are ready to supply the greater mix.
"I have actually verified the preparedness with all producers last week," she said.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has not released allocations for producers to sell to sustain merchants, which it usually has actually done by this time of the year.
"We can't provide the items without order documents, and order documents are acquired after we get contracts with fuel business," Gunawan told Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments)."
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 initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the greater blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than unrefined oil. Indonesia utilizes earnings from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.
In November, BPDPKS estimated it needed 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 walking looms.
However, the palm oil industry would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, including palm smallholders.
"I believe there will be a hold-up, because if it is carried out, the aid will increase. Where will (the cash) come from?" he stated.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 application would be challenging in 2025.
"The implementation might be sluggish and progressive in 2025 and probably more busy in 2026," he said.
Prabowo, who took office in October, campaigned on a platform to raise the required further 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; Editing by Tony Munroe and Lincoln Feast.)