Biodiesel allocation decree was waited for by market

Indonesia had prepared to release 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 (KL) of biodiesel for 2025 circulation, while giving the market until the end of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to launch the mandatory 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 federal government was working to increase the necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel merchants will be given up until Feb. 28 to adjust to the B40 mix. She stated the hold-up was due to the fact that of technical difficulties connected to aids for the fuel.

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

Fuel retailers and biodiesel producers had said they were unable to prepare contracts for biodiesel circulation without the decree.

The biodiesel allocation for 2025 indicated an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry data showed on Friday.

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

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

BPDPKS, the agency in charge of collecting and handling the palm oil funds, approximated in November B40 would need a 68% subsidy boost.

To help fund that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, however for that to happen, another main policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati