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Biodiesel allotment decree was waited for by market

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

Palm oil benchmark contract 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the industry till the end 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 planned to launch the necessary requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial regulation has actually been signed," the minister Bahlil Lahadalia told reporters, including the federal government was working to increase the compulsory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, stated biodiesel manufacturers and fuel retailers will be offered till Feb. 28 to adjust to the B40 mix. She stated the hold-up was because of technical difficulties 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 agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had actually said they were unable to draw up for biodiesel distribution without the decree.

The biodiesel allotment for 2025 showed an increase from 2024's approximated biodiesel usage of 12.98 KL, ministry information revealed on Friday.

Of the total 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 allowances 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 price gap between the palm oil and fossil fuels for the overall allowance.

BPDPKS, the agency in charge of collecting and managing 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 existing 7.5%, however for that to take place, another main guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)