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

Industry individuals looking for phase-in duration anticipate steady intro

Industry deals with technical difficulties and expense issues

Government funding issues develop due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel required from Jan. 1, which has actually fuelled issues it might suppress global palm oil products, looks increasingly most likely to be carried out slowly, analysts said, as market participants seek a phase-in period.

Indonesia, the world's most significant producer 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 set off a dive in palm futures and might push prices even more in 2025.

While the federal government of President Prabowo Subianto has stated consistently the plan is on track for full launch in the new year, market watchers say costs and technical challenges are most likely to result in partial execution before complete adoption throughout the sprawling archipelago.

Indonesia's biggest fuel retailer, state-owned Pertamina, said it requires to customize a few of its fuel terminals to mix and keep B40, which will be finished during a "transition duration after federal government develops the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without providing information.

During a meeting with federal government authorities and biodiesel producers last week, fuel merchants asked for a two-month transition period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not instantly respond to an ask for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be implemented slowly, and that biodiesel producers are prepared to provide the greater mix.

"I have confirmed the preparedness with all producers last week," she stated.

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, said the government has not issued allocations for producers to sell to fuel sellers, which it normally has actually done by this time of the year.

"We can't deliver the goods without order files, and purchase order documents are obtained after we get contracts with fuel business," Gunawan told Reuters. "Fuel companies can only sign contracts after the ministerial decree (on biodiesel allocations)."

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

FUNDING CHALLENGES

For the federal government, moneying the greater mix could likewise be an obstacle as palm oil now costs around $400 per metric lot more than petroleum. Indonesia uses proceeds from palm oil export levies, managed by a company called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% boost 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 hike looms.

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

"I think there will be a hold-up, since if it is implemented, the aid will increase. Where will (the cash) originate from?" he stated.

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

"The implementation may be sluggish and progressive in 2025 and probably more fast-paced in 2026," he said.

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 yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)