Biodiesel allotment decree was waited for by market

Indonesia had prepared to introduce greater biodiesel mix on Jan. 1

Palm oil standard 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the industry until completion of next month to adapt to the higher level of the fuel in the mix.

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

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia informed 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 sellers will be given up until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical obstacles connected to subsidies for the fuel.

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

Fuel sellers and biodiesel manufacturers had actually stated they were unable to prepare agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 indicated a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

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

"The remaining allocations will be sold at market value. The non-PSO allowance is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the cost gap between the palm oil and nonrenewable fuel sources for the total allotment.

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

To help finance that, Indonesia prepares to increase its for crude palm oil (CPO) to 10% from the current 7.5%, but for that to take place, another official guideline is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)