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

Indonesia firmly insists B40 biodiesel execution to continue on Jan. 1

Industry participants looking for phase-in period anticipate gradual intro

Industry faces technical obstacles and expense concerns

Government funding concerns emerge due to palm oil price disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to expand its biodiesel required from Jan. 1, which has actually fuelled concerns it could suppress worldwide palm oil supplies, looks increasingly most likely to be implemented gradually, experts stated, as market individuals seek a phase-in duration.

Indonesia, the world's greatest manufacturer and exporter of palm oil, prepares to raise the compulsory mix of palm oil in biodiesel to 40% - called B40 - from 35%, a policy that has activated a dive in palm futures and might press prices even more in 2025.

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

Indonesia's greatest fuel seller, state-owned Pertamina, stated it requires to modify a few of its fuel terminals to blend and save B40, which will be completed throughout a "shift duration after federal government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without supplying details.

During a conference with government officials and biodiesel producers last week, fuel retailers requested a two-month transition duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in participation, told Reuters.

Hiswana Migas, the fuel sellers' association, did not instantly respond to a request for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the required hike would not be executed gradually, which biodiesel producers are ready to supply the greater mix.

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

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

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

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

FUNDING CHALLENGES

For the federal government, funding the higher blend could also be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such spaces.

In November, BPDPKS approximated it needed a 68% boost 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 hike impends.

However, the palm oil industry would challenge a levy hike, said 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 delay, since if it is executed, the aid will increase. Where will (the money) come from?" he stated.

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

"The execution may be slow and gradual in 2025 and probably more busy in 2026," he said.

Prabowo, who took office in October, campaigned on a platform to raise the mandate even more to B50 or B60 to accomplish energy self-sufficiency and cut $20 billion of yearly fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina