Biodiesel allocation decree was awaited by market

Indonesia had prepared to release greater biodiesel mix on Jan. 1

Palm oil standard agreement rose 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the industry until the end of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to introduce the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually been signed," the minister Bahlil Lahadalia told press reporters, adding the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel merchants will be provided up until Feb. 28 to adjust to the B40 mix. She stated the hold-up was due to the fact that of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had actually said they were not able to prepare contracts for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed an increase from 2024's approximated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

Of the total allowance for this year, 7.55 million KL is for the public service responsibility (PSO), which covers sectors such as public transportation, whose sales will be subsidised by the country's palm oil fund.

"The remaining allocations will be cost market price. The non-PSO allotment is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the price gap between the palm oil and fossil fuels for the total allowance.

BPDPKS, the company in charge of gathering and handling the palm oil funds, estimated in November B40 would require a 68% aid boost.

To help fund that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, but for that to take place, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)