Biodiesel allotment decree was awaited by industry

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

Palm oil standard agreement increased 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the market till completion of next month to adjust to the higher level of the fuel in the mix.

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

"The ministerial regulation has been signed," the minister Bahlil Lahadalia told press reporters, including the government was working to increase the necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel retailers will be offered till Feb. 28 to adjust to the B40 mix. She said the delay was since of technical challenges connected to subsidies for the fuel.

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

Fuel retailers and biodiesel manufacturers had actually stated they were not able to draw up agreements for biodiesel distribution without the decree.

The biodiesel allotment for 2025 indicated an increase from 2024's estimated biodiesel intake of 12.98 KL, ministry data showed on Friday.

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

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

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