Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals seeking phase-in duration anticipate progressive introduction

Industry faces technical difficulties and expense concerns

Government funding problems develop due to palm oil price variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has fuelled concerns it might suppress worldwide palm oil products, looks progressively likely to be carried out slowly, analysts said, as industry participants 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 push rates even more in 2025.

While the federal government of President Prabowo Subianto has said consistently the plan is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are most likely to lead to partial application before complete adoption across the stretching archipelago.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and keep B40, which will be finished throughout a "transition duration after federal government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

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

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

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

"I have verified the readiness with all manufacturers last week," she said.

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

"We can't deliver the items without purchase order documents, and order documents are obtained after we get contracts with fuel companies," Gunawan informed Reuters. "Fuel companies can just sign contracts after the ministerial decree (on biodiesel allotments)."

The government plans to designate 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 federal government, funding the higher blend might also be a difficulty as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses earnings from palm oil export levies, handled by an agency called BPDPKS, to cover such gaps.

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

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

"I believe there will be a delay, due to the fact that if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

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

"The implementation might be slow and gradual in 2025 and most likely more hectic 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 annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina