Biodiesel allowance decree was awaited by industry

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

Palm oil standard contract 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till completion of next month to adapt to the higher level of the fuel in the mix.

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

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

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel merchants will be provided till Feb. 28 to adapt to the B40 mix. She said the hold-up was because of technical challenges linked to aids for the fuel.

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

Fuel sellers and biodiesel manufacturers had actually stated they were unable to prepare agreements for biodiesel circulation 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 overall allowance for this year, 7.55 million KL is for the general 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 allowances will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the rate space in between the palm oil and fossil fuels for the general allotment.

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

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