Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia insists B40 biodiesel execution to proceed on Jan. 1
Industry participants looking for phase-in period expect progressive introduction
Industry faces technical obstacles and expense issues
Government financing problems 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 might curb global palm oil supplies, looks significantly likely to be carried out gradually, analysts stated, as market individuals seek a phase-in period.
Indonesia, the world’s most significant manufacturer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has triggered a jump in palm futures and may press prices even more in 2025.
While the government of President Prabowo Subianto has stated consistently the strategy is on track for full launch in the new year, industry watchers say costs and technical challenges are most likely to result in partial execution before complete adoption across the stretching island chain.
Indonesia’s greatest fuel merchant, Pertamina, stated it needs to modify a few of its fuel terminals to mix and save B40, which will be completed throughout a “transition duration after government develops the mandate”, spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.
During a conference with government authorities and biodiesel producers last week, fuel retailers requested a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, told Reuters.
Hiswana Migas, the fuel merchants’ association, did not immediately react to a request for remark.
Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be carried out slowly, and that biodiesel manufacturers are all set to provide the greater mix.
“I have verified the readiness with all manufacturers last week,” she said.
APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not released allowances for producers to offer to sustain sellers, which it generally has done by this time of the year.
“We can’t perform without purchase order documents, and order documents are acquired after we get agreements with fuel companies,” Gunawan told Reuters. “Fuel business can only sign agreements after the ministerial decree (on biodiesel allowances).”
The government prepares to allocate 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 government, funding the greater mix could also be a difficulty as palm oil now costs around $400 per metric heap more than crude oil. Indonesia utilizes proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such gaps.
In November, BPDPKS approximated it required a 68% boost in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, fuelling market speculation that a levy hike looms.
However, the palm oil industry would object to a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would injure the industry, including palm smallholders.
“I think there will be a hold-up, due to the fact that if it is carried out, the subsidy will increase. Where will (the cash) originate from?” he stated.
Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, stated B40 execution would be challenging in 2025.
“The execution might be slow and steady in 2025 and most likely more hectic in 2026,” he said.
Prabowo, who took workplace in October, campaigned on a platform to raise the mandate further to B50 or B60 to achieve 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.)