Biodiesel allocation decree was waited for by industry

Indonesia had actually prepared to launch greater biodiesel mix on Jan. 1

Palm oil benchmark agreement increased 1% after previous fall

Government aims for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the industry till the end of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to introduce the obligatory 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 informed press reporters, including the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel merchants will be offered till Feb. 28 to adjust to the B40 mix. She said the hold-up was since of technical challenges connected to aids for the fuel.

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

Fuel merchants and biodiesel manufacturers had actually said they were not able to draw up contracts for biodiesel circulation without the decree.

The biodiesel allocation for 2025 showed a boost from 2024's estimated biodiesel consumption of 12.98 KL, ministry data revealed 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 cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the price space between the palm oil and nonrenewable fuel sources for the overall allowance.

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

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