Jakarta: Indonesia is moving forward with plans to expand its biodiesel mandate starting January 1, sparking concerns about its potential impact on global palm oil supplies. However, analysts believe the implementation may be gradual as industry participants push for a phase-in period.
As the world’s largest producer and exporter of palm oil, Indonesia intends to increase the mandatory mix of palm oil in biodiesel to 40%, known as B40, up from the current 35%. The policy has already driven up palm oil futures and could keep prices high in 2025.
Although President Prabowo Subianto’s government insists the plan is set for full rollout in the new year, experts suggest costs and technical hurdles may lead to partial implementation before full adoption across the country.
State-owned fuel retailer Pertamina said it needs time to modify fuel terminals to handle and store B40. These adjustments are expected to occur during a transition period following the government’s mandate, said company spokesperson Fadjar Djoko Santoso. Fuel retailers have requested a two-month transition period, according to Ernest Gunawan, secretary general of the biofuel producers association APROBI.
Despite these requests, Energy Ministry senior official Eniya Listiani Dewi told Reuters the mandate hike would not be phased in and that biodiesel producers are prepared to supply the higher blend. APROBI said producers are still waiting for government-issued allocations to start deliveries, as purchase orders and contracts with fuel companies depend on ministerial approval.
The government has announced plans to allocate 15.62 million kilolitres (4.13 billion gallons) of biodiesel for B40 in 2025—lower than the initial estimate of 16 million kilolitres, Eniya added.
Funding challenges could also slow the rollout. Palm oil currently costs about $400 per metric ton more than crude oil, and subsidies to cover the price gap are funded through export levies managed by the BPDPKS agency. In November, BPDPKS estimated a 68% increase in subsidies to 47 trillion rupiah ($2.93 billion) next year, with levy collections projected at 21 trillion rupiah. This has led to speculation about a possible levy hike.
However, Tauhid Ahmad, a senior analyst with think tank INDEF, warned that raising levies could face resistance from the palm oil industry, particularly smallholders, as it might harm the sector.
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