Biodiesel allotment decree was awaited by industry

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

Palm oil benchmark contract rose 1% after previous fall

Government goes 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the industry up until completion of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's largest of palm oil, had prepared to release the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually been signed," the minister Bahlil Lahadalia informed press 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 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 subsidies for the fuel.

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

Fuel merchants and biodiesel manufacturers had said they were unable to prepare agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's estimated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

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

"The remaining allotments will be cost market rate. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the cost gap between the palm oil and fossil fuels for the total allotment.

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

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