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

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

Industry participants seeking phase-in duration anticipate progressive introduction

Industry faces technical challenges and expense concerns

Government funding concerns emerge due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has actually fuelled concerns it could suppress worldwide palm oil supplies, looks progressively likely to be implemented slowly, experts said, as industry individuals seek a phase-in duration.

Indonesia, the world's greatest producer 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 activated a jump in palm futures and may pressure costs even more in 2025.

While the government of President Prabowo Subianto has said consistently the strategy is on track for complete launch in the brand-new year, market watchers state expenses and technical challenges are likely to result in partial implementation before full adoption across the stretching island chain.

Indonesia's most significant fuel seller, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to blend and save B40, which will be finished during a "shift duration after government develops the mandate", spokesperson Fadjar Djoko Santoso told Reuters, without providing information.

During a conference with government authorities and biodiesel producers recently, fuel sellers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel producers association APROBI, who remained in participation, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi informed Reuters the mandate walking would not be carried out slowly, which biodiesel producers are all set to supply the higher blend.

"I have verified the preparedness with all manufacturers recently," she stated.

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

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

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

FUNDING CHALLENGES

For the federal government, funding the greater mix might also be a challenge as palm oil now costs around $400 per metric ton more than crude oil. Indonesia uses 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, sustaining market speculation that a levy walking looms.

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

"I believe there will be a hold-up, due to the fact that if it is carried out, the aid will increase. Where will (the cash) come from?" he said.

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

"The application might be slow and steady in 2025 and most likely more hectic in 2026," he stated.

Prabowo, who took office in October, campaigned on a platform to raise the required further 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