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

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

Industry individuals seeking phase-in period expect progressive introduction

Industry faces technical challenges and expense concerns

Government funding issues arise due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually sustained concerns it might suppress international palm oil products, looks significantly most likely to be carried out gradually, analysts said, as market participants seek a phase-in period.

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 dive in palm futures and might press costs further in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, industry watchers say expenses and technical difficulties are likely to lead to partial implementation before complete adoption across the sprawling island chain.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and save B40, which will be completed during a "transition period after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a conference with federal government authorities and biodiesel producers recently, fuel merchants requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in presence, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be carried out gradually, and that biodiesel manufacturers are prepared to provide the greater mix.

"I have confirmed the readiness with all producers recently," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has not provided allowances for manufacturers to sell to fuel sellers, which it usually has actually done by this time of the year.

"We can't perform without order documents, and order documents are obtained after we get agreements with fuel companies," Gunawan informed . "Fuel business can just sign contracts after the ministerial decree (on biodiesel allocations)."

The federal government plans to designate 15.62 million kilolitres (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 federal government, funding the higher mix might also be a challenge as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

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

However, the palm oil industry would challenge a levy walking, said Tauhid Ahmad, a senior expert with think-tank INDEF, as it would harm the market, consisting of palm smallholders.

"I think there will be a hold-up, because if it is executed, the aid will increase. Where will (the money) come from?" he stated.

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

"The application might be slow and steady in 2025 and probably more fast-paced in 2026," he said.

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