Biodiesel allowance decree was awaited by market

Indonesia had actually prepared to launch 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 remark)

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 circulation, while giving the market till the end of next month to adapt to the greater level of the fuel in the mix.

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

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

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel merchants will be provided until Feb. 28 to adjust to the B40 mix. She said the delay was because of technical difficulties linked 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 recovered by around 1%.

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

The biodiesel allotment for 2025 suggested a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry information revealed on Friday.

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

"The remaining allowances will be offered at market rate. The non-PSO allotment is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the total allowance.

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

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