Biodiesel allocation decree was waited for by industry

Indonesia had planned to release greater biodiesel mix on Jan. 1

Palm oil benchmark agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the industry until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to introduce the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has been signed," the minister Bahlil Lahadalia told press reporters, including the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel sellers will be offered until Feb. 28 to adapt to the B40 mix. She stated the delay was since of connected to subsidies for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel producers had stated they were unable to draw up agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 showed an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

Of the total allowance for this year, 7.55 million KL is for the public service commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the country's palm oil fund.

"The remaining allocations will be cost market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the cost gap between the palm oil and nonrenewable fuel sources for the total allowance.

BPDPKS, the firm in charge of collecting and handling the palm oil funds, estimated in November B40 would need a 68% subsidy boost.

To help finance that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, however for that to happen, another official policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)