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JAKARTA (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 until the end of next month to adapt to the higher level of the fuel in the mix.
Indonesia, the world's largest exporter of palm oil, had planned to launch the mandatory 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, adding the 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 retailers will be given until Feb. 28 to adapt to the B40 mix. She said the delay was because of technical challenges linked to subsidies for the fuel.
The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil benchmark contract on Thursday. On Friday, it recovered by around 1%.
Fuel retailers and biodiesel producers had said they were unable to draw up contracts for biodiesel distribution without the decree.
The biodiesel allocation for 2025 indicated an increase from 2024's estimated biodiesel consumption of 12.98 KL, ministry data showed on Friday.
Of the total allocation for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as public transportation, whose sales will be subsidised by the country's palm oil fund.
"The remaining allocations will be sold at market price. The non-PSO allocation is set at 8.07 million KL," Bahlil said, adding the fund could not subsidise the price gap between the palm oil and fossil fuels for the overall allocation.
BPDPKS, the agency in charge of collecting and managing the palm oil funds, estimated in November B40 would require a 68% subsidy increase.
To help finance that, Indonesia plans to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, but for that to happen, another official regulation is required.
(Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis) - Reuters
