Biodiesel allotment decree was waited for by industry

Indonesia had actually prepared to release greater biodiesel mix on Jan. 1

Palm oil criteria agreement 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till 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 prepared to launch the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has been signed," the minister Bahlil Lahadalia told reporters, adding the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel retailers will be given up until Feb. 28 to adapt to the B40 mix. She said the delay was because of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had resulted in a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel merchants and had actually stated they were not able to draw up agreements for biodiesel circulation without the decree.

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

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

"The remaining allotments will be cost market rate. The non-PSO allotment is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the cost space between the palm oil and fossil fuels for the general allowance.

BPDPKS, the company in charge of collecting and managing the palm oil funds, estimated in November B40 would require a 68% aid boost.

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, however for that to happen, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati