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Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia firmly insists B40 biodiesel application to proceed on Jan. 1
looking for phase-in period expect progressive introduction
Industry deals with technical challenges and cost concerns
Government funding concerns develop due to palm oil cost variation
JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to expand its biodiesel required from Jan. 1, which has actually fuelled issues it could suppress global palm oil supplies, looks significantly most likely to be executed gradually, experts stated, as industry participants look for a phase-in period.
Indonesia, the world’s most significant producer 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 activated a jump in palm futures and might press rates even more in 2025.
While the government of President Prabowo Subianto has said repeatedly the plan is on track for complete launch in the new year, industry watchers say costs and technical challenges are most likely to lead to partial implementation before complete adoption across the stretching archipelago.
Indonesia’s greatest fuel retailer, state-owned Pertamina, said it requires to modify some of its fuel terminals to blend and store B40, which will be completed during a “transition duration after federal government establishes the required”, spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.
During a conference with federal government authorities and biodiesel producers last week, fuel merchants requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.
Hiswana Migas, the fuel retailers’ association, did not right away react to a request for comment.
Energy ministry senior main Eniya Listiani Dewi told Reuters the required hike would not be executed slowly, which biodiesel producers are all set to supply the greater blend.
“I have verified the preparedness with all producers recently,” she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not released allocations for manufacturers to offer to sustain sellers, which it normally has done by this time of the year.
“We can’t provide the products without order files, and order documents are acquired after we get contracts with fuel business,” Gunawan told Reuters. “Fuel business can just sign contracts after the ministerial decree (on biodiesel allowances).”
The government plans to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial quote of 16 million kilolitres.
FUNDING CHALLENGES
For the federal government, funding the greater mix might also be a difficulty as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes proceeds from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.
In November, BPDPKS estimated it needed a 68% boost 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 challenge a levy hike, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the industry, consisting of palm smallholders.
“I believe there will be a delay, because if it is implemented, the aid will increase. Where will (the cash) originate from?” he stated.
Nagaraj Meda, managing director of Transgraph Consulting, a product consultancy, stated B40 execution would be challenging in 2025.
“The implementation might be slow and steady in 2025 and most likely more busy in 2026,” he said.
Prabowo, who took workplace in October, campaigned on a platform to raise the required even more 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.)