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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 seeking phase-in period expect gradual introduction

Industry deals with technical difficulties and expense issues

Government funding concerns develop due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's strategy to broaden its biodiesel mandate from Jan. 1, which has actually fuelled issues it might curb global palm oil supplies, looks increasingly most likely to be implemented gradually, experts stated, as industry participants look for a phase-in duration.

Indonesia, the world's most significant manufacturer 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 set off a dive in palm futures and might push costs further in 2025.

While the federal government of President Prabowo Subianto has actually said repeatedly the plan is on track for full launch in the brand-new year, industry watchers say costs and technical difficulties are most likely to result in partial implementation before full adoption across the sprawling island chain.

Indonesia's biggest fuel merchant, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and store B40, which will be finished during a "shift duration after federal government establishes the mandate", spokesperson Fadjar Djoko Santoso informed Reuters, without offering information.

During a meeting with federal government authorities and biodiesel producers recently, fuel retailers requested a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who was in attendance, told Reuters.

Hiswana Migas, the fuel sellers' association, did not right away respond to an ask for comment.

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

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be combined with diesel fuel, stated the government has actually not released allowances for producers to sell to sustain retailers, which it usually has actually done by this time of the year.

"We can't provide the products without order files, and order files are gotten after we get agreements with fuel companies," Gunawan informed Reuters. "Fuel business can only sign agreements after the ministerial decree (on biodiesel allotments)."

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

FUNDING CHALLENGES

For the government, moneying the higher mix might also be an obstacle as palm oil now costs around $400 per metric ton more than petroleum. Indonesia utilizes profits from palm oil export levies, managed by a firm called BPDPKS, to cover such spaces.

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

However, the palm oil industry would object to a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would hurt the market, consisting of palm smallholders.

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

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

"The implementation might be sluggish and gradual in 2025 and most likely more fast-paced in 2026," he stated.

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