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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry individuals looking for phase-in duration anticipate gradual introduction

Industry deals with technical challenges and expense issues

Government funding issues arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has actually fuelled issues it could suppress global palm oil supplies, looks progressively most likely to be executed slowly, experts stated, as industry individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, plans to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a jump in palm futures and may press costs even more in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are likely to lead to partial execution before complete adoption throughout the stretching island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and save B40, which will be finished throughout a "transition duration after government establishes the required", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with federal government officials and biodiesel producers last week, fuel retailers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, told Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a request for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required hike would not be carried out slowly, and that biodiesel manufacturers are all set to provide the higher mix.

"I have validated the readiness with all producers recently," she said.

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

"We can't deliver the products without order documents, and order files are obtained after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allocations)."

The federal 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 price quote of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, funding the higher mix could likewise be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses profits from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

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 hike impends.

However, the palm oil market would object to a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm 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 subsidy will increase. Where will (the cash) come 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 sluggish and gradual 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 attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina