Biodiesel allocation decree was awaited by industry

Indonesia had planned to release higher 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 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 distribution, while providing the industry till 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 actually prepared to release the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

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

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

Fuel sellers and biodiesel manufacturers had said they were unable to draw up contracts for biodiesel distribution without the decree.

The biodiesel allocation for 2025 indicated a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry data revealed on Friday.

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

"The staying allowances will be cost market value. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, including the fund might not subsidise the cost space in between the palm oil and fossil fuels for the overall allotment.

BPDPKS, the agency in charge of collecting and handling the palm oil funds, approximated in November B40 would require a 68% aid increase.

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