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

Indonesia insists B40 biodiesel implementation to proceed on Jan. 1

Industry individuals looking for phase-in period expect progressive intro

Industry faces technical obstacles and expense issues

Government financing concerns emerge due to palm oil cost variation

JAKARTA, Dec 18 (Reuters) - Indonesia's plan to broaden its biodiesel mandate from Jan. 1, which has sustained issues it might suppress international palm oil products, looks significantly most likely to be executed slowly, analysts stated, as market participants seek a phase-in period.

Indonesia, the world's biggest producer and exporter of palm oil, plans to raise the compulsory 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 further in 2025.

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

Indonesia's greatest fuel seller, state-owned Pertamina, stated it needs to customize some of its fuel terminals to blend and save B40, which will be finished during a "transition duration after federal government develops the required", spokesperson Fadjar Djoko Santoso told Reuters, without details.

During a conference 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 was in presence, told Reuters.

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

Energy ministry senior main Eniya Listiani Dewi told Reuters the required walking would not be executed slowly, and that biodiesel producers are all set to supply the greater mix.

"I have actually verified the readiness with all producers last week," she said.

APROBI, whose members make fat methyl ester (FAME) from palm oil to be blended with diesel fuel, stated the government has actually not provided allotments for producers to offer to sustain merchants, which it typically has actually done by this time of the year.

"We can't perform without purchase order files, and order files are obtained after we get agreements with fuel business," Gunawan told Reuters. "Fuel companies can only sign agreements after the ministerial decree (on biodiesel allowances)."

The federal government prepares to designate 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 higher blend might likewise be a challenge as palm oil now costs around $400 per metric heap more than unrefined oil. Indonesia uses earnings from palm oil export levies, handled by a firm called BPDPKS, to cover such gaps.

In November, BPDPKS approximated it required a 68% boost 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 market would challenge a levy hike, stated Tauhid Ahmad, a senior analyst with think-tank INDEF, as it would harm the market, including palm smallholders.

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

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

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

Prabowo, who took workplace 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