Biodiesel allocation decree was waited for by industry

Indonesia had actually prepared to introduce higher biodiesel mix on Jan. 1

Palm oil benchmark agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market till completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to launch the necessary 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 told reporters, adding the federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel retailers will be provided till Feb. 28 to adjust to the B40 mix. She said the delay was because of technical challenges connected 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 merchants and biodiesel producers had stated they were not able to prepare contracts for biodiesel distribution without the decree.

The biodiesel allotment for 2025 showed a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry information revealed on Friday.

Of the total 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 remaining allotments will be cost market cost. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the price gap between the palm oil and nonrenewable fuel sources for the total allocation.

BPDPKS, the firm in charge of gathering and managing the palm oil funds, approximated in November B40 would require a 68% subsidy boost.

To help fund that, Indonesia prepares to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however 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)