Biodiesel allowance decree was awaited by market

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

Palm oil standard contract increased 1% after previous fall

Government aims 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 circulation, while providing the industry until 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 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, adding the government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel merchants will be provided until Feb. 28 to adapt to the B40 mix. She said the delay was due to the fact that of technical difficulties connected to subsidies for the fuel.

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

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

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

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

"The remaining allowances will be offered at market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the cost space between the palm oil and nonrenewable fuel sources for the total allotment.

BPDPKS, the firm in charge of gathering and managing the palm oil funds, approximated in November B40 would require a 68% subsidy boost.

To assist 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 take place, 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)