Biodiesel allowance decree was waited for by industry

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

Palm oil benchmark contract rose 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the market till 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 actually prepared to launch the compulsory 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 reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel retailers will be offered until Feb. 28 to adapt to the B40 mix. She stated the hold-up was since of technical obstacles linked to subsidies for the fuel.

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

Fuel merchants and biodiesel manufacturers had actually said they were not able to prepare agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 suggested a boost from 2024's approximated biodiesel intake of 12.98 KL, ministry data revealed on Friday.

Of the overall allotment for this year, 7.55 million KL is for the general public service responsibility (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 offered at market value. The non-PSO allotment 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 general allocation.

BPDPKS, the agency in charge of collecting and handling the palm oil funds, estimated in November B40 would need a 68% aid boost.

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