Biodiesel allocation decree was awaited by industry

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

Palm oil criteria agreement increased 1% after previous fall

Government intends 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the market until completion of next month to adjust to the higher level of the fuel in the mix.

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

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

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel merchants will be provided until Feb. 28 to adapt to the B40 mix. She said the delay was because of technical obstacles linked to subsidies for the fuel.

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

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

The biodiesel allowance for 2025 suggested a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry data showed on Friday.

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

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

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

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