Biodiesel allocation decree was waited for by industry
Indonesia had actually planned to release higher biodiesel mix on Jan. 1
Palm oil benchmark agreement rose 1% after previous fall
Government goes for 50% biodiesel mix in 2026
(Recasts with energy minister's remark)
By Bernadette Christina and Fransiska Nangoy
JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday assigning 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market till the end of next month to adjust to the greater level of the fuel in the mix.
Indonesia, the world's largest exporter of palm oil, had planned to launch the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.
"The ministerial policy has been signed," the minister Bahlil Lahadalia informed press reporters, including the federal government was working to increase the compulsory biodiesel mix to 50% next year.
Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel sellers will be offered up until Feb. 28 to adjust to the B40 mix. She said the hold-up was due to the fact that of technical difficulties linked to subsidies for the fuel.
The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil benchmark contract on Thursday. On Friday, it recovered by around 1%.
Fuel retailers and biodiesel producers had actually said they were unable to prepare contracts for biodiesel distribution without the decree.
The biodiesel allocation for 2025 showed a boost from 2024's approximated biodiesel consumption of 12.98 KL, ministry data showed on Friday.
Of the overall allowance for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.
"The staying allocations will be offered at market cost. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the rate gap between the palm oil and nonrenewable fuel sources for the general allotment.
BPDPKS, the firm in charge of gathering and managing the palm oil funds, estimated in November B40 would need a 68% subsidy increase.
To help finance that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, but for that to occur, another main regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)