Biodiesel allowance decree was awaited by industry

Indonesia had actually prepared to launch higher biodiesel mix on Jan. 1

Palm oil criteria agreement 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while giving the industry up until the end of next month to adjust to the higher level of the fuel in the mix.

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

"The ministerial regulation 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, stated biodiesel manufacturers and fuel retailers will be given until Feb. 28 to adjust to the B40 mix. She said the hold-up was because of technical challenges connected to subsidies for the fuel.

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

Fuel merchants and biodiesel producers had stated they were not able to draw up agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 indicated a boost from 2024's approximated biodiesel usage of 12.98 KL, ministry information revealed on Friday.

Of the overall allotment 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 remaining allotments will be cost market value. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the rate gap between the palm oil and fossil fuels for the total allowance.

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

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