Biodiesel allocation decree was waited for by industry

Indonesia had planned to launch higher biodiesel mix on Jan. 1

Palm oil criteria agreement rose 1% after previous fall

Government aims 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 circulation, while providing the market up until the end of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had actually prepared to launch the mandatory 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 mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel producers and fuel sellers will be offered till Feb. 28 to adjust to the B40 mix. She said the hold-up was because of technical challenges connected 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 recovered by around 1%.

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

The biodiesel allocation for 2025 showed an increase from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed 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 public transport, whose sales will be subsidised by the country's palm oil fund.

"The staying allocations will be cost market price. The non-PSO allocation is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the cost gap between the palm oil and fossil fuels for the overall allowance.

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

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