Indonesia insists B40 biodiesel execution to proceed on Jan. 1

Industry participants looking for phase-in period expect gradual intro

Industry deals with technical obstacles and expense issues

Government financing concerns develop due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has fuelled issues it might curb global palm oil products, looks progressively most likely to be executed slowly, analysts said, as industry individuals seek a phase-in duration.

Indonesia, the world's most significant producer 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 activated a jump in palm futures and may pressure prices even more in 2025.

While the government of President Prabowo Subianto has stated repeatedly the strategy is on track for full launch in the new year, market watchers say 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 requires to customize a few of its fuel terminals to blend and store B40, which will be finished during a "transition period after government develops the required", spokesperson Fadjar Djoko Santoso informed Reuters, without offering details.

During a conference with federal government authorities and biodiesel manufacturers last week, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the mandate hike would not be executed slowly, and that are ready to supply the higher mix.

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

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

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

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 quote of 16 million kilolitres.

FUNDING CHALLENGES

For the government, funding the greater blend might also be a challenge as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes profits from palm oil export levies, handled by a company called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it required a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year and approximated levy collection at around 21 trillion rupiah, sustaining market speculation that a levy hike looms.

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

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

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

"The execution might be slow and progressive in 2025 and most likely more busy in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the required further 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; Editing by Tony Munroe and Lincoln Feast.)