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Indonesia’s Higher Biodiesel Mandate Rollout May Be Gradual,
Indonesia firmly insists B40 biodiesel implementation to proceed on Jan. 1
Industry participants looking for phase-in duration expect progressive intro
Industry faces technical difficulties and cost issues
Government funding problems occur due to palm oil price variation
JAKARTA, Dec 18 (Reuters) – Indonesia’s strategy to broaden its biodiesel required from Jan. 1, which has fuelled concerns it might curb international palm oil materials, looks significantly most likely to be executed slowly, analysts stated, as industry individuals seek a phase-in duration.
Indonesia, the world’s biggest manufacturer and exporter of palm oil, plans to raise the obligatory mix of palm oil in biodiesel to 40% – called B40 – from 35%, a policy that has triggered a dive in palm futures and might press costs even more in 2025.
While the federal government of President Prabowo Subianto has stated repeatedly the strategy is on track for complete launch in the new year, industry watchers state expenses and technical obstacles are most likely to lead to partial application before complete adoption throughout the stretching island chain.
Indonesia’s most significant fuel seller, state-owned Pertamina, said it requires to customize a few of its fuel terminals to mix and save B40, which will be completed throughout a “shift period after federal government establishes the required”, spokesperson Fadjar Djoko Santoso informed Reuters, without supplying information.
During a meeting with federal government officials and biodiesel producers recently, fuel sellers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, told Reuters.
Hiswana Migas, the fuel merchants’ association, did not right away react to a request for comment.
Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be implemented slowly, and that biodiesel manufacturers are all set to supply the higher blend.
“I have verified the readiness with all manufacturers recently,” she stated.
APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be with diesel fuel, stated the federal government has not provided allotments for producers to offer to fuel retailers, which it typically has actually done by this time of the year.
“We can’t perform without purchase order files, and order files are acquired after we get contracts with fuel business,” Gunawan told Reuters. “Fuel business can just sign contracts after the ministerial decree (on biodiesel allocations).”
The federal government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya informed Reuters, less than its initial price quote of 16 million kilolitres.
FUNDING CHALLENGES
For the government, funding the higher blend could likewise be a challenge as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such spaces.
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 is imminent.
However, the palm oil industry would object to a levy walking, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would injure the industry, including palm smallholders.
“I believe there will be a delay, since if it is executed, the subsidy will increase. Where will (the cash) originate from?” he stated.
Nagaraj Meda, handling director of Transgraph Consulting, a product consultancy, said B40 implementation would be challenging in 2025.
“The implementation might be sluggish and gradual in 2025 and most likely more hectic 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)