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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 expect steady introduction

Industry faces technical obstacles and cost issues

Government financing concerns emerge due to palm oil cost disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to expand its biodiesel mandate from Jan. 1, which has fuelled concerns it might suppress global palm oil materials, looks progressively most likely to be implemented gradually, analysts stated, as market participants look for a phase-in period.

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 might push prices even more in 2025.

While the federal government of President Prabowo Subianto has said repeatedly the plan is on track for full launch in the new year, industry watchers say expenses and technical difficulties are most likely to lead to partial application before full adoption across the stretching island chain.

Indonesia's greatest fuel merchant, state-owned Pertamina, stated it needs to customize a few of its fuel terminals to mix and keep B40, which will be completed during a "transition period after federal government establishes the required", representative Fadjar Djoko Santoso told Reuters, without offering information.

During a meeting with government officials and biodiesel manufacturers recently, fuel retailers asked for a two-month shift period, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in presence, informed Reuters.

Hiswana Migas, the fuel merchants' association, did not immediately react to a demand for remark.

Energy ministry senior official Eniya Listiani Dewi told Reuters the required walking would not be implemented gradually, and that biodiesel producers are prepared to provide the higher blend.

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

APROBI, whose members make fatty acid methyl ester (FAME) from palm oil to be blended with diesel fuel, said the government has actually not provided allowances for manufacturers to offer to fuel retailers, which it normally has actually done by this time of the year.

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

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

FUNDING CHALLENGES

For the federal government, the higher mix could also be a challenge as palm oil now costs around $400 per metric heap more than petroleum. Indonesia utilizes earnings 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 aids 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 impends.

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

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

"The execution may be sluggish and gradual in 2025 and most likely more fast-paced 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 achieve energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina