Biodiesel allotment decree was waited for by industry

Indonesia had planned to release greater biodiesel mix on Jan. 1

Palm oil criteria agreement 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to introduce the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel sellers will be given up until Feb. 28 to adjust to the B40 mix. She said the delay was because of technical challenges linked to aids for the fuel.

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

Fuel retailers and biodiesel manufacturers had said they were not able to draw up agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 suggested an increase from 2024's approximated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

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

"The staying allotments will be offered at market value. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the price gap between the palm oil and fossil fuels for the overall allocation.

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

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