Biodiesel allotment decree was waited for by market

Indonesia had actually prepared to introduce higher biodiesel mix on Jan. 1

Palm oil benchmark contract rose 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the industry till the end of next month to adjust to the higher 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 policy has been signed," the minister Bahlil Lahadalia informed reporters, including the federal 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 offered up until Feb. 28 to adapt to the B40 mix. She stated 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 criteria agreement on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had said they were not able to draw up contracts for biodiesel distribution without the decree.

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

Of the overall 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 nation's palm oil fund.

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

BPDPKS, the agency in charge of collecting and managing the palm oil funds, estimated in November B40 would need a 68% subsidy increase.

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