Biodiesel allocation decree was waited for by market

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

Palm oil benchmark agreement 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market till completion 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 prepared to introduce the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel merchants will be provided till Feb. 28 to adjust to the B40 mix. She stated the delay was since of technical obstacles connected to aids for the fuel.

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

Fuel sellers and biodiesel manufacturers had actually stated they were unable to prepare contracts for biodiesel distribution without the decree.

The biodiesel allowance for 2025 indicated an increase from 2024's estimated biodiesel consumption of 12.98 KL, ministry information showed on Friday.

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

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

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 prepares to increase its export levy for crude palm oil (CPO) to 10% from the present 7.5%, but for that to happen, another official regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)