Biodiesel allowance decree was waited for by market

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

Palm oil criteria agreement rose 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 distribution, while offering the industry up until the end of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to introduce the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel retailers will be offered until Feb. 28 to adapt to the B40 mix. She stated the delay 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 contract on Thursday. On Friday, it recovered by around 1%.

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

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

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

"The staying allowances will be sold at market value. The non-PSO allocation is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the cost gap between the palm oil and fossil fuels for the overall allotment.

BPDPKS, the company in charge of collecting and managing the palm oil funds, approximated in November B40 would need a 68% subsidy increase.

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