Biodiesel allotment decree was awaited by market

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

Palm oil benchmark contract rose 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, 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 prepared to introduce the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has 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 authorities, said biodiesel producers and fuel merchants will be given up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was since of technical difficulties linked to subsidies for the fuel.

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

Fuel sellers and biodiesel manufacturers had actually stated they were unable to prepare contracts for biodiesel circulation without the decree.

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

Of the total allocation for this year, 7.55 million KL is for the public service commitment (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

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

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

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