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

Indonesia insists B40 biodiesel application to continue on Jan. 1

Industry participants looking for phase-in duration anticipate steady intro

Industry deals with technical challenges and cost concerns

Government funding problems emerge due to palm oil rate variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained concerns it could suppress worldwide palm oil products, looks increasingly likely to be implemented slowly, analysts said, as market participants seek a phase-in period.

Indonesia, the world's most significant manufacturer and exporter of palm oil, plans to raise the obligatory 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 prices even more in 2025.

While the government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the new year, industry watchers state costs and technical obstacles are likely to lead to partial implementation before complete adoption across the stretching archipelago.

Indonesia's greatest fuel merchant, state-owned Pertamina, said it requires to customize a few of its fuel terminals to blend and keep B40, which will be completed during a "shift duration after federal government establishes the required", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with federal government officials and biodiesel manufacturers recently, fuel sellers asked for a two-month transition duration, Ernest Gunawan, secretary general of biofuel producers association APROBI, who was in presence, told Reuters.

Hiswana Migas, the fuel retailers' association, did not immediately react to an ask for remark.

Energy ministry senior official Eniya Listiani Dewi informed Reuters the mandate hike would not be carried out slowly, and that biodiesel producers are all set to provide the higher mix.

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

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

"We can't provide the items without order documents, and purchase order documents are acquired after we get agreements with fuel business," Gunawan told Reuters. "Fuel business can just sign contracts after the ministerial decree (on biodiesel allotments)."

The government plans to allocate 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 higher mix might also be a challenge as palm oil now costs around $400 per metric load more than petroleum. Indonesia uses proceeds from palm oil export levies, managed by an agency called BPDPKS, to cover such spaces.

In November, BPDPKS estimated 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 is imminent.

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

"I believe there will be a hold-up, due to the fact that if it is executed, the aid will increase. Where will (the money) originate from?" he stated.

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

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

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