Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry participants seeking phase-in period anticipate steady introduction

Industry faces technical obstacles and cost issues

Government funding issues emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its from Jan. 1, which has sustained concerns it might curb global palm oil products, looks progressively likely to be carried out slowly, experts said, as market individuals look for a phase-in period.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the mandatory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has triggered a dive in palm futures and may press prices even more in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the brand-new year, market watchers state expenses and technical difficulties are most likely to result in partial application before complete adoption throughout the stretching archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, stated it requires to modify some of its fuel terminals to blend and keep B40, which will be finished during a "transition period after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without offering details.

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

Hiswana Migas, the fuel retailers' association, did not instantly respond to a demand for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented gradually, which biodiesel manufacturers are prepared to supply the higher blend.

"I have verified 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 federal government has actually not provided allowances for manufacturers to offer to sustain merchants, which it generally has actually done by this time of the year.

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

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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater mix could likewise be an obstacle as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

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, sustaining market speculation that a levy walking looms.

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

"I believe there will be a hold-up, because if it is carried out, 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 application may be slow and steady in 2025 and probably more hectic in 2026," he stated.

Prabowo, who took workplace in October, campaigned on a platform to raise the required even more to B50 or B60 to achieve 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.)