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

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

Industry participants looking for phase-in period anticipate progressive intro

Industry deals with technical difficulties and expense concerns

Government funding issues arise due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it might suppress international palm oil materials, looks significantly likely to be executed gradually, analysts stated, as market individuals look for a phase-in duration.

Indonesia, the world's biggest manufacturer and exporter of palm oil, prepares to raise the necessary mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has actually set off a jump in palm futures and may press rates even more in 2025.

While the federal government of President Prabowo Subianto has actually stated consistently the strategy is on track for complete launch in the brand-new year, market watchers state expenses and technical obstacles are likely to lead to partial implementation before full adoption across the stretching archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it needs to customize a few of its fuel terminals to blend and keep B40, which will be completed throughout a "shift period after government establishes the required", spokesperson Fadjar Djoko Santoso informed Reuters, without providing details.

During a meeting with government authorities and biodiesel manufacturers recently, fuel sellers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not right away respond to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be implemented gradually, and that biodiesel producers are ready to provide the higher 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 combined with diesel fuel, said the federal government has not issued allocations for producers to sell to fuel merchants, which it usually has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the government, moneying the higher blend might likewise be a challenge as palm oil now costs around $400 per metric ton more than unrefined oil. uses proceeds from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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

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

"I believe there will be a hold-up, since if it is carried out, the aid will increase. Where will (the money) come from?" he stated.

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

"The application may be slow and progressive in 2025 and most likely more hectic in 2026," he stated.

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