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Biodiesel allotment decree was waited for by market

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

Palm oil benchmark contract increased 1% after previous fall

Government aims 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 providing the industry up until the end of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to launch the mandatory 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 federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a senior authorities, said biodiesel producers and fuel retailers will be given until Feb. 28 to adapt to the B40 mix. She stated the delay 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 recovered by around 1%.

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

The biodiesel allowance for 2025 suggested 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 general public service responsibility (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allotments will be cost market price. The non-PSO allotment 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 company in charge of gathering and handling the palm oil funds, estimated in November B40 would need a 68% subsidy boost.

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