Biodiesel allowance decree was waited for by industry

Indonesia had actually planned to release higher biodiesel mix on Jan. 1

Palm oil criteria contract 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 up until 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 prepared to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel sellers will be given until Feb. 28 to adapt to the B40 mix. She said the hold-up was because of technical challenges connected to subsidies for the fuel.

The non-implementation on Jan. 1. had actually led to a 2.6% drop in the Malaysian palm oil criteria contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had actually stated they were not able to prepare contracts for biodiesel circulation without the decree.

The biodiesel allowance for 2025 suggested a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry data showed on Friday.

Of the overall allowance for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

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

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

To assist fund that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, but for that to happen, another official policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)