Biodiesel allocation decree was waited for by market

Indonesia had planned to introduce greater biodiesel mix on Jan. 1

Palm oil standard 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 circulation, while providing the market up until 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 planned to introduce the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually been signed," the minister Bahlil Lahadalia informed press reporters, adding the government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel merchants will be provided up until Feb. 28 to adjust to the B40 mix. She said the hold-up was because of technical obstacles linked to aids for the fuel.

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

Fuel retailers and biodiesel producers had stated they were unable to prepare contracts for biodiesel distribution without the decree.

The biodiesel allotment for 2025 showed an increase from 2024's approximated biodiesel intake of 12.98 KL, ministry information showed on Friday.

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

"The staying allocations will be cost market cost. The non-PSO allocation is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the total allowance.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would require a 68% subsidy increase.

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