Biodiesel allowance decree was awaited by market

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

Palm oil benchmark contract increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and 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 distribution, while providing the industry up until completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to launch the necessary 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 press reporters, adding the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel merchants will be provided until Feb. 28 to adjust to the B40 mix. She stated the delay was since of technical difficulties linked to subsidies for the fuel.

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

Fuel retailers and biodiesel manufacturers had actually said they were not able to prepare contracts for biodiesel circulation 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 total allowance for this year, 7.55 million KL is for the general public service commitment (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 cost market price. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the rate gap between the palm oil and nonrenewable fuel sources for the overall allotment.

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

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the existing 7.5%, but for that to happen, another main guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati