Biodiesel allowance decree was awaited by industry

Indonesia had actually planned to launch greater biodiesel mix on Jan. 1

Palm oil criteria contract rose 1% after previous fall

Government intends 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 giving the market until completion of next month to adjust to the greater level of the fuel in the mix.

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

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

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

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

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

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

Of the overall allotment for this year, 7.55 million KL is for the general public service responsibility (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 sold at market rate. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the cost gap between the palm oil and fossil fuels for the total allowance.

BPDPKS, the company in charge of gathering and handling the palm oil funds, approximated in November B40 would require a 68% subsidy boost.

To assist fund that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, however for that to occur, another main policy is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati