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

Industry individuals seeking phase-in period expect steady introduction

Industry deals with technical difficulties and expense concerns

Government financing problems arise due to palm oil rate disparity

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel required from Jan. 1, which has sustained issues it could curb international palm oil supplies, looks increasingly most likely to be executed slowly, analysts said, as market individuals look for a phase-in duration.

Indonesia, the world's biggest 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 actually triggered a dive in palm futures and might push costs further in 2025.

While the federal government of President Prabowo Subianto has said consistently the plan is on track for full launch in the new year, industry watchers state expenses and technical obstacles are most likely to result in partial execution before full adoption throughout the sprawling archipelago.

Indonesia's most significant fuel retailer, state-owned Pertamina, stated it requires to customize a few of its fuel terminals to mix and keep B40, which will be completed during a "shift duration after federal government develops the mandate", representative Fadjar Djoko Santoso informed Reuters, without supplying information.

During a meeting with government authorities and biodiesel producers last week, fuel retailers asked for a two-month shift duration, Ernest Gunawan, secretary general of biofuel manufacturers association APROBI, who remained in attendance, informed Reuters.

Hiswana Migas, the fuel retailers' association, did not instantly react to a request for comment.

Energy ministry senior main Eniya Listiani Dewi informed Reuters the required walking would not be executed gradually, which biodiesel manufacturers are ready to supply the higher mix.

"I have validated the readiness with all manufacturers recently," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be combined with diesel fuel, said the government has actually not provided allocations for manufacturers to offer to sustain retailers, which it generally 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 contracts after the ministerial decree (on biodiesel allocations)."

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 preliminary estimate of 16 million kilolitres.

FUNDING CHALLENGES

For the federal government, moneying the higher mix might likewise be a challenge as palm oil now costs around $400 per metric ton more than petroleum. Indonesia uses profits from palm oil export levies, by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% boost in aids to 47 trillion rupiah ($2.93 billion) next year and estimated 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 injure the market, including palm smallholders.

"I think there will be a hold-up, because 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 implementation would be challenging in 2025.

"The execution may be sluggish and progressive in 2025 and most likely more hectic in 2026," he said.

Prabowo, who took workplace in October, campaigned on a platform to raise the mandate even more to B50 or B60 to attain energy self-sufficiency and cut $20 billion of annual fuel imports. ($1 = 16,035.0000 rupiah) (Reporting by Bernadette Christina; Editing by Tony Munroe and Lincoln Feast.)