Biodiesel allowance decree was waited for by market

Indonesia had planned to launch higher biodiesel mix on Jan. 1

Palm oil benchmark 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the industry till the end 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 planned to launch the obligatory 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 informed press reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel sellers will be offered up until Feb. 28 to adjust to the B40 mix. She stated the hold-up was because 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 benchmark contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had actually stated they were unable to draw up agreements for biodiesel distribution without the decree.

The biodiesel allocation for 2025 showed an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry information revealed 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 nation's palm oil fund.

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

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

To assist 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 main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)