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

Industry individuals seeking phase-in duration expect gradual introduction

Industry deals with technical difficulties and expense concerns

Government financing problems develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it might suppress global palm oil products, looks progressively likely to be carried out gradually, experts said, as industry participants look for a phase-in duration.

Indonesia, the world's biggest producer and exporter of palm oil, prepares to raise the obligatory 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 pressure prices even more 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 most likely to result in partial application before full adoption across the sprawling archipelago.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying information.

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

Hiswana Migas, the fuel retailers' association, did not right away respond to a request for comment.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be implemented slowly, and that biodiesel producers are all set to supply the greater blend.

"I have actually confirmed the readiness with all manufacturers last week," she stated.

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

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

The government prepares to assign 15.62 million kilolitres (4.13 billion gallons) of FAME for B40 in 2025, Eniya told Reuters, less than its preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater blend could likewise be a challenge as palm oil now costs around $400 per metric lot more than petroleum. Indonesia utilizes earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it needed a 68% increase 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 is imminent.

However, the palm oil market would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, including palm smallholders.

"I believe there will be a hold-up, since if it is executed, the aid will increase. Where will (the cash) come from?" he said.

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

"The execution might be sluggish and progressive in 2025 and probably more hectic in 2026," he stated.

Prabowo, who took workplace 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)