decree was awaited by market

Indonesia had planned to launch greater biodiesel mix on Jan. 1

Palm oil criteria contract increased 1% after previous fall

Government intends 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 industry till completion 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 actually prepared to release the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has actually been signed," the minister Bahlil Lahadalia told press reporters, including the federal government was working to increase the necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel merchants will be provided up until Feb. 28 to adjust to the B40 mix. She stated the hold-up was due to the fact that of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had actually caused a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had actually said they were unable to draw up agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's estimated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

Of the total allotment for this year, 7.55 million KL is for the public service commitment (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.

"The remaining allowances will be sold at market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the price gap in between the palm oil and fossil fuels for the general allotment.

BPDPKS, the agency in charge of collecting and managing the palm oil funds, estimated in November B40 would require a 68% aid boost.

To help finance that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, but for that to take place, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)