Biodiesel allowance decree was waited for by market

Indonesia had planned to launch higher biodiesel mix on Jan. 1

Palm oil standard contract rose 1% after previous fall

Government intends for 50% biodiesel mix in 2026

(Recasts with energy minister's remark)

By Bernadette Christina and Fransiska Nangoy

JAKARTA, Jan 3 (Reuters) - Indonesia Energy and Mineral Resources Minister signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the industry up until completion of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually planned to introduce the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel retailers will be given until Feb. 28 to adapt to the B40 mix. She said the hold-up was since of technical obstacles connected to subsidies for the fuel.

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

Fuel sellers and biodiesel producers had actually said they were unable to draw up contracts for biodiesel distribution without the decree.

The biodiesel allocation for 2025 showed 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 public service obligation (PSO), which covers sectors such as public transport, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allotments will be offered at market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the rate gap in between the palm oil and nonrenewable fuel sources for the total allocation.

BPDPKS, the agency in charge of collecting and handling the palm oil funds, approximated in November B40 would need a 68% aid boost.

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