Biodiesel allowance decree was awaited by industry

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

Palm oil criteria agreement rose 1% after previous fall

Government intends 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 distribution, while offering the market till completion of next month to adapt to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to introduce 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, including the federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel retailers will be given up until Feb. 28 to adapt to the B40 mix. She said the delay was because of technical challenges linked to subsidies for the fuel.

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

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

The biodiesel allocation for 2025 showed an increase from 2024's approximated biodiesel intake of 12.98 KL, ministry data revealed on Friday.

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

"The remaining allotments will be cost market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund could not subsidise the price space in between the palm oil and fossil fuels for the general allotment.

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

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