Indonesia insists B40 biodiesel application to proceed on Jan. 1

Industry participants looking for phase-in period expect steady intro

Industry deals with technical difficulties and cost issues

Government funding issues arise due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually sustained issues it might curb worldwide palm oil supplies, looks progressively most likely to be implemented gradually, analysts said, as industry participants look for a phase-in duration.

Indonesia, the world's greatest 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 set off a jump in palm futures and may press costs further in 2025.

While the government of President Prabowo Subianto has actually stated consistently the plan is on track for full launch in the new year, market watchers say expenses and technical obstacles are likely to result in partial application before full adoption throughout the stretching island chain.

Indonesia's greatest fuel retailer, state-owned Pertamina, said it needs to modify some of its fuel terminals to mix and keep B40, which will be completed during a "shift period after federal government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with government authorities and biodiesel manufacturers recently, fuel sellers requested a two-month transition period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in attendance, informed Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out gradually, and that biodiesel producers are all set to provide the greater mix.

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

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

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

The federal 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 blend might also be an obstacle as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

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

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

"I believe there will be a delay, since if it is implemented, the aid will increase. Where will (the cash) originate from?" he said.

Nagaraj Meda, handling director of Transgraph Consulting, a commodity consultancy, said B40 implementation would be challenging in 2025.

"The execution may be sluggish and steady in 2025 and most likely more busy in 2026," he said.

Prabowo, who took workplace 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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina