Biodiesel allotment decree was waited for by industry

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

Palm oil benchmark agreement rose 1% after previous fall

Government intends 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 offering the market till the end 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 planned to introduce the obligatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

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

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel merchants will be provided until Feb. 28 to adapt to the B40 mix. She said the hold-up was because of technical obstacles linked to aids for the fuel.

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

Fuel sellers and biodiesel producers had stated they were unable to draw up contracts for biodiesel circulation without the decree.

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

Of the overall allotment 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 remaining allotments will be offered at market rate. The non-PSO allotment is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the price gap in between the palm oil and nonrenewable fuel sources for the general allocation.

BPDPKS, the agency in charge of gathering and managing the palm oil funds, approximated in November B40 would require a 68% subsidy boost.

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