Biodiesel allocation decree was waited for by market

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

Palm oil criteria agreement increased 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the market 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 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 press reporters, adding the federal government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel producers and fuel sellers will be offered until Feb. 28 to adapt to the B40 mix. She stated the hold-up was because of technical difficulties connected to subsidies for the fuel.

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

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

The biodiesel allotment for 2025 suggested a boost from 2024's estimated biodiesel consumption 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 allocations will be cost market value. The non-PSO allotment is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the cost gap between the palm oil and nonrenewable fuel sources for the general allotment.

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

To help fund that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the current 7.5%, however for that to take place, 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)