Indonesia’s decision to move towards a 60% biodiesel blending mandate from 2027 could reshape global palm oil trade flows, with India likely to face higher costs and greater competition for supplies, The Free Press Journal reported.
Indonesia has announced plans to implement B60, even as it is still working towards fully achieving the B50 mandate introduced in July 2026. Under B50, conventional diesel is blended with 50% biodiesel made primarily from palm oil-derived fatty acid methyl ester (FAME).
The new programme builds on Indonesia’s earlier B30, B35 and B40 initiatives and is aimed at cutting carbon emissions, improving energy security and reducing the country’s dependence on diesel imports.
The proposed increase in biodiesel consumption is attracting global attention because Indonesia is the world’s largest palm oil producer and exporter.
Global palm oil production is estimated at around 81.5 million tonnes a year. Indonesia accounts for nearly 47.5 million tonnes, or about 60% of global output, while Malaysia produces around 19.5 million tonnes.
Exports are equally important to the international market. Indonesia ships nearly half of its production overseas, at around 24 million tonnes annually, while Malaysia exports about 16 million tonnes, or roughly 80% of its output.
Any significant increase in domestic palm oil consumption for biodiesel could therefore reduce the quantity available for export and alter established trade patterns.
The issue has become more important amid higher crude oil prices and concerns over weather-related crop losses. Higher crude prices improve the economic case for biodiesel, while adverse El Nino conditions could put additional pressure on vegetable oil production in Southeast Asia and South Asia.
Indonesia is currently assessing whether its available crude palm oil supplies and biodiesel production capacity will be sufficient for B60. The country may also need to examine additional oil-palm planting, productivity improvements and the technical specifications required for FAME used in the higher blend.
India could be among the countries most affected by changes in Indonesia’s palm oil exports. The country imports around 16-17 million tonnes of vegetable oils annually, making it the world’s largest vegetable oil importer.
Palm oil has traditionally accounted for nearly 60% of India’s vegetable oil imports because it is generally cheaper than soft oils such as soybean and sunflower oil.
However, higher palm oil prices have recently encouraged Indian buyers to shift towards alternative oils.
Between April and July this year, India imported around 5.3 million tonnes of vegetable oils, of which palm oil accounted for about 2.3 million tonnes. The share of soybean and sunflower oils has increased as buyers respond to changing price differences and availability.
India’s imports from Indonesia have also declined. Imports were around 320,000 tonnes in July this year, compared with 520,000 tonnes in July 2025.
Indian buyers have increasingly sourced palm oil from Thailand and Papua New Guinea, while Argentina and Brazil remain important suppliers of soybean oil.
Despite concerns over palm oil availability, global vegetable oil supplies are not currently facing a major shortage.
World vegetable oil production has increased over the past five years and is estimated at around 245 million tonnes in 2026-27, about 6 million tonnes higher than the previous year.
This means India has alternatives if Indonesian palm oil supplies become tighter. However, shifts in sourcing can increase costs and disrupt established supply chains.
India is also in a position to use its substantial import market as a diplomatic and commercial lever. The country runs a goods trade deficit of around $13 billion with Indonesia, largely because of imports of palm oil, coal, timber and nickel.
Greater engagement between the two countries could help ensure that Indonesia’s domestic biodiesel programme does not unnecessarily disrupt palm oil supplies to Indian buyers.
The economics of Indonesia’s ambitious biodiesel programme will also depend heavily on crude oil prices.
With Brent crude currently around $95 a barrel, replacing imported diesel with domestically produced biodiesel becomes more financially attractive. However, a resolution of the Persian Gulf conflict and the full reopening of the Strait of Hormuz could trigger a sharp correction in crude prices.
If crude prices move closer to $60 a barrel, the financial advantage of higher biodiesel blending could weaken considerably.
Therefore, while Indonesia’s B60 programme could put pressure on global palm oil trade in the near term, its long-term viability will depend on crude oil prices, palm oil production, biodiesel economics and the country’s ability to expand domestic feedstock supplies.
