Biodiesel allocation decree was awaited by market

Indonesia had planned to release higher 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 distribution, while offering the industry up until 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 planned to release the obligatory 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 informed press reporters, including the government was working to increase the mandatory biodiesel mix to 50% next year.

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

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

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

The biodiesel allowance for 2025 suggested a boost from 2024's approximated biodiesel usage of 12.98 KL, ministry data showed on Friday.

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

"The staying allocations will be sold at market value. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the price gap in between the palm oil and nonrenewable fuel sources for the total allotment.

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

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