Jakarta: Indonesian palm oil producers say the country has sufficient crude palm oil (CPO) supplies to meet the higher demand created by the government’s new B50 biodiesel mandate this year, but warned that sustaining the programme in the coming years will require a significant increase in production.
Indonesia made a 50% palm oil-based biodiesel blend mandatory from July 1, replacing the earlier B40 requirement. The move is expected to raise annual CPO consumption for biodiesel to between 16.3 million and 17 million tonnes, The Star reported.
Industry representatives estimate national CPO production at around 53 million tonnes in 2026, which they say is enough to meet the additional domestic demand generated by the B50 programme.
“This year should be safe, because the additional 1.74 million tonnes needed for B50 can still be met from current production capacity,” Indonesian Palm Oil Association Chairman Eddy Martono told The Jakarta Post.
However, Martono cautioned that future supply will depend on production levels, which could be affected if El Niño weather conditions reduce harvests. He said Indonesia would need to increase annual CPO production to between 55 million and 60 million tonnes to sustain the higher biodiesel mandate.
Smallholder growers also expressed confidence that the country can support the B50 programme without expanding plantation areas, arguing that higher production can be achieved by improving yields on existing plantations.
According to Gulat Manurung, Chairman of the Indonesian Oil Palm Farmers Association, smallholders manage about 40% of Indonesia’s oil palm area, much of which consists of ageing, low-yield plantations. Replacing older trees with higher-yielding varieties through the government’s smallholder replanting programme could significantly increase production without opening new land.
“The answer is productivity, not expanding plantation area,” Manurung said, urging the government to accelerate replanting efforts, which have progressed slowly since the programme began in 2017.
He warned, however, that financing the replanting programme could become more challenging as more palm oil is diverted to domestic biodiesel production.
According to Manurung, the B50 mandate could channel around 19 million tonnes of CPO into the domestic market, reducing exports by an estimated four to five million tonnes. Lower exports would reduce collections from export levies that finance the Palm Oil Plantation Fund Management Agency (BPDP), which supports biodiesel subsidies and smallholder replanting.
He added that export levies are reflected in lower prices for fresh fruit bunches (FFB), with growers estimated to lose around 445 rupiah per kilogram under the current system. Despite this, farmers continue to support the B50 policy because stronger FFB prices under the earlier B40 programme have more than compensated for the levy burden.
“We have to immediately carry out replanting and improve plantation productivity so exports are not disrupted. We cannot cut ourselves off from the export market,” Manurung said.
Indonesia, the world’s largest producer and exporter of palm oil, is increasing domestic consumption of the commodity as President Prabowo Subianto seeks to reduce diesel imports and strengthen the country’s energy security.
Energy and Mineral Resources Minister Bahlil Lahadalia said the B50 programme would increase domestic demand for CPO, provide market certainty and help maintain stable prices for farmers.
The ministry has raised this year’s biodiesel allocation by 12.5% to 17.6 million kilolitres from the original 15.64 million kilolitres under the B40 programme, according to Eniya Listiani Dewi, Director General of Renewable Energy.
The government estimates that the B50 mandate will increase avoided carbon dioxide emissions to 44.46 million tonnes this year, compared with 39.66 million tonnes under the previous B40 programme.
To ensure that higher biodiesel production does not affect cooking oil availability, the government has tightened distribution rules through Trade Ministry Regulation No. 20/2026. The regulation requires producers to prioritise domestic supplies of packaged cooking oil, including the subsidised Minyakita brand, while meeting biodiesel obligations.
According to a quarterly outlook published by the Indonesia Palm Oil Strategic Studies on July 8, total CPO demand under the B50 programme is expected to rise to about 77 million tonnes from around 64 million tonnes under B40, with most of the increase driven by biodiesel production.
