Biodiesel allowance decree was awaited by market

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

Palm oil standard agreement rose 1% after previous fall

Government aims 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the market till 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 planned to introduce 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 press reporters, adding the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel sellers will be provided until Feb. 28 to adapt to the B40 mix. She stated the hold-up was due to the fact that of technical challenges connected to aids for the fuel.

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

Fuel merchants and biodiesel manufacturers had actually said they were not able to prepare agreements for biodiesel distribution without the decree.

The biodiesel allocation for 2025 showed a boost from 2024's approximated biodiesel usage 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 commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The remaining allowances will be offered at market rate. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the price gap in between the palm oil and fossil fuels for the overall allowance.

BPDPKS, the firm in charge of gathering and handling the palm oil funds, approximated 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 existing 7.5%, however for that to occur, another official guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati