Indonesia is conducting tests as it prepares for the incoming government’s plan to increase the palm oil-based biodiesel blending mandate to 50%, up from the current 35%, according to a government official. This move has raised concerns in the industry about the potential impact on export supplies, reported The Edge Malaysia
Currently, under its ‘B35’ program, Indonesia has one of the highest biofuel blend mandates globally. The outgoing government of President Joko Widodo had planned to increase this to B40 next year.
Prabowo Subianto, who will succeed Widodo in October after winning the February election, has promised to increase the mandate further to B50 to reduce oil imports, although no timeline has been set.
In preparation for the presidential transition, the current administration has instructed the palm oil industry to get ready for B50 and conduct necessary tests.
“A static test for B50 composition is being conducted by the energy ministry and several stakeholders,” Eniya Listiani Dewi, Director General of Renewable Energy at the energy ministry, told Reuters on Wednesday. This will be followed by vehicle road tests, a process that usually takes about a year. The agriculture ministry is also evaluating palm oil supplies.
The Indonesian Biofuel Producers Association (APROBI) has indicated that B50 would require the industry to invest in new processing capacity. The Indonesian Palm Oil Producers Association (GAPKI) has warned that a higher blend could negatively affect exports due to stagnating production.
Since 2019, domestic palm oil consumption has increased by an average of 7.6%, partly due to policies such as biodiesel mandates and compulsory domestic sales for cooking oil. In contrast, production has risen by less than 1% annually, while Indonesia remains the world’s leading producer and exporter of palm oil.
GAPKI Chairman Eddy Martono expressed concern, stating, “Given the current stagnation in production, it would be better to maintain B35. If diesel is cheaper, why should we impose a higher mandate?” GAPKI also questioned the timing of the planned B40 mandate for 2025, suggesting it should only be implemented if export prices become less profitable.
Under the B35 mandate, 11 million metric tons of crude palm oil (CPO) will be used this year, increasing to 14 million tons under B40. The B50 mandate would require approximately 18 million tons of CPO, which could impact domestic cooking oil prices, exports, and government revenue from exports, Martono warned. He urged the government to enhance production by accelerating a replanting program for smallholders or establishing a dedicated area for biodiesel feedstock before raising the mandate further.
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