Biodiesel allocation decree was awaited by market

Indonesia had planned to release greater biodiesel mix on Jan. 1

Palm oil criteria agreement increased 1% after previous fall

Government aims 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 distribution, while giving the market until completion of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually planned to launch the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel merchants will be provided till Feb. 28 to adjust to the B40 mix. She stated the hold-up was because of technical difficulties 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 recuperated by around 1%.

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

The biodiesel allocation for 2025 indicated a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry information showed 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 transportation, whose sales will be subsidised by the country's palm oil fund.

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

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

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