Biodiesel allocation decree was waited for by market

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

Palm oil benchmark contract increased 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 distribution, while providing the market till completion of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to release the compulsory 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 informed reporters, including the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel producers and fuel sellers will be provided up until Feb. 28 to adjust to the B40 mix. She said the delay was since of technical challenges linked to aids for the fuel.

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

Fuel retailers and biodiesel producers had said they were unable to prepare agreements for biodiesel circulation without the decree.

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

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

"The remaining allotments will be cost market rate. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the price space in between the palm oil and nonrenewable fuel sources for the total allowance.

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

To assist finance that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the present 7.5%, but for that to take place, 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)