Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia insists B40 biodiesel application to proceed on Jan. 1
Industry participants looking for phase-in duration expect progressive intro
Industry faces technical difficulties and cost issues
Government funding concerns develop due to palm oil price disparity
JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel required from Jan. 1, which has actually fuelled concerns it could suppress global palm oil materials, looks significantly likely to be implemented slowly, experts stated, as industry participants look for a phase-in duration.
Indonesia, the world’s most significant producer 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 actually set off a jump in palm futures and might push costs even more in 2025.
While the government of President Prabowo Subianto has actually said consistently the plan is on track for complete launch in the new year, market watchers state expenses and technical obstacles are likely to result in partial execution before full adoption throughout the stretching archipelago.
Indonesia’s greatest fuel merchant, state-owned Pertamina, said it needs to customize some of its fuel terminals to mix and store B40, which will be completed throughout a “shift duration after federal government establishes the required”, representative Fadjar Djoko Santoso informed Reuters, without supplying details.
During a conference with government authorities and biodiesel manufacturers last week, fuel merchants asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in participation, told Reuters.
Hiswana Migas, the fuel sellers’ association, did not immediately react to an ask for remark.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the required walking would not be executed slowly, which biodiesel manufacturers are prepared to provide the greater blend.
“I have confirmed the readiness with all producers last week,” she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the federal government has not released allowances for manufacturers to sell to sustain retailers, which it usually has actually done by this time of the year.
“We can’t provide the items without order files, and purchase order documents are gotten after we get contracts with fuel business,” Gunawan informed Reuters. “Fuel companies can just sign agreements after the ministerial decree (on biodiesel allocations).”
The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its initial estimate of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the higher mix might also be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia utilizes proceeds from palm oil export levies, managed by an agency 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 walking looms.
However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, including palm smallholders.
“I believe there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) originate from?” he stated.
Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.
“The execution might be slow and progressive in 2025 and most likely more fast-paced in 2026,” he said.
Prabowo, who took office in October, campaigned on a platform to raise the further 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; Editing by Tony Munroe and Lincoln Feast.)