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1 Indonesia's Higher Biodiesel Mandate Rollout May Be Gradual,

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

looking for phase-in duration expect gradual intro

Industry faces technical difficulties and cost concerns

Government funding problems occur due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has sustained concerns it might curb worldwide palm oil products, looks progressively likely to be executed gradually, analysts said, as market participants seek a phase-in duration.

Indonesia, the world's greatest producer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has set off a jump in palm futures and may push prices further in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for complete launch in the new year, industry watchers state costs and technical challenges are likely to lead to partial execution before complete adoption across the stretching archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, said it needs to customize some of its fuel terminals to mix and keep B40, which will be completed throughout a "shift duration after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.

During a meeting with federal government authorities and biodiesel manufacturers last week, fuel merchants asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a demand for remark.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, and that biodiesel manufacturers are ready to provide the higher mix.

"I have actually validated the preparedness with all manufacturers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has not provided allowances for manufacturers to sell to fuel sellers, which it typically has done by this time of the year.

"We can't perform without purchase order files, and purchase order documents are gotten after we get agreements with fuel business," Gunawan informed Reuters. "Fuel companies can only sign agreements after the ministerial decree (on biodiesel allotments)."

The government prepares to allocate 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 federal government, moneying the greater mix might likewise be an obstacle as palm oil now costs around $400 per metric load more than petroleum. Indonesia utilizes earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS estimated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy walking looms.

However, the palm oil industry would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the industry, including palm smallholders.

"I believe there will be a hold-up, because if it is implemented, the subsidy will increase. Where will (the cash) originate from?" he stated.

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

"The application might be sluggish and progressive in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more 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