Indonesia firmly insists B40 biodiesel execution to continue on Jan. 1

Industry individuals seeking phase-in period expect gradual intro

Industry faces technical obstacles and cost concerns

Government financing concerns develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has fuelled concerns it might curb global palm oil materials, looks significantly most likely to be implemented slowly, analysts said, as market individuals seek a phase-in duration.

Indonesia, the world's most significant 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 activated a dive in palm futures and may press rates even more in 2025.

While the government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the brand-new year, market watchers say expenses and technical difficulties are most likely to result in partial implementation before complete adoption across the stretching archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, said it requires to modify some of its fuel terminals to mix and store B40, which will be finished throughout a "transition duration after federal government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

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

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for remark.

Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be implemented slowly, which biodiesel manufacturers are prepared to provide the higher blend.

"I have actually confirmed the preparedness with all producers last week," she said.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the federal government has actually not issued allowances for manufacturers to sell to fuel merchants, which it generally has actually done by this time of the year.

"We can't deliver the goods without purchase order documents, and order files are acquired after we get contracts with fuel business," Gunawan informed Reuters. "Fuel business can only sign contracts after the ministerial decree (on biodiesel allowances)."

The federal government prepares to assign 15.62 million (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, moneying the greater mix might also be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses proceeds from palm oil export levies, handled by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% boost in aids 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 challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.

"I think there will be a delay, due to the fact that if it is implemented, the subsidy will increase. Where will (the money) originate from?" he said.

Nagaraj Meda, managing director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.

"The execution might be sluggish and progressive in 2025 and most likely more fast-paced in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the mandate further to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina