Biodiesel allowance decree was awaited by market

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

Palm oil criteria agreement increased 1% after previous fall

Government goes 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while giving the industry up until completion of next month to adjust to the greater level of the fuel in the mix.

Indonesia, the world's biggest 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 actually been signed," the minister Bahlil Lahadalia told press reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel sellers will be provided until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical obstacles linked to subsidies for the fuel.

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

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

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

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

"The remaining allotments will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the price space between the palm oil and fossil fuels for the general allowance.

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

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