Biodiesel allowance decree was awaited by market

Indonesia had prepared to release higher biodiesel mix on Jan. 1

Palm oil benchmark contract increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the industry until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has been signed," the minister Bahlil Lahadalia informed reporters, including the federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel retailers will be given until Feb. 28 to adjust to the B40 mix. She stated the delay was since of technical difficulties linked to aids for the fuel.

The non-implementation on Jan. 1. had actually led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recuperated by around 1%.

Fuel merchants and biodiesel manufacturers had said they were not able to draw up contracts for biodiesel distribution without the decree.

The biodiesel allocation for 2025 showed an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry data revealed on Friday.

Of the total allocation for this year, 7.55 million KL is for the general public service obligation (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.

"The remaining allocations will be sold at market price. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the price gap in between the palm oil and nonrenewable fuel sources for the total allocation.

BPDPKS, the agency in charge of gathering and managing the palm oil funds, estimated in November B40 would require a 68% aid boost.

To help finance that, to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, however for that to happen, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati