Indonesia insists B40 biodiesel application to continue on Jan. 1
Industry participants seeking phase-in period anticipate steady introduction
Industry faces technical obstacles and cost concerns
Government financing problems occur 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 issues it might suppress worldwide palm oil supplies, looks significantly likely to be implemented gradually, experts said, as industry individuals look for a phase-in period.
Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a dive in palm futures and might push prices further in 2025.
While the federal government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, industry watchers say expenses and technical challenges are most likely to result in partial execution before full adoption throughout the sprawling archipelago.
Indonesia's biggest fuel retailer, Pertamina, stated it needs to modify some of its fuel terminals to blend and keep B40, which will be completed throughout a "transition duration after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.
During a meeting 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 attendance, told Reuters.
Hiswana Migas, the fuel retailers' association, did not instantly react to a demand for remark.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be executed slowly, which biodiesel manufacturers are all set to provide the higher blend.
"I have actually validated the preparedness with all producers recently," she said.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the federal government has actually not issued allowances for producers to sell to sustain retailers, which it typically has done by this time of the year.
"We can't perform without purchase order documents, and purchase order documents are acquired after we get contracts with fuel business," Gunawan informed Reuters. "Fuel companies can just 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 told Reuters, less than its preliminary price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, moneying the higher mix might likewise be a difficulty as palm oil now costs around $400 per metric ton more than unrefined oil. Indonesia uses profits from palm oil export levies, handled by an agency 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 approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike impends.
However, the palm oil market would object to a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.
"I think there will be a hold-up, since if it is carried out, the subsidy will increase. Where will (the cash) originate from?" he said.
Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, stated B40 application would be challenging in 2025.
"The application may be sluggish and steady in 2025 and most likely more hectic in 2026," he stated.
Prabowo, who took workplace 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
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Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,
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