Biodiesel allocation decree was awaited by market

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

Palm oil benchmark contract rose 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 distribution, while offering the market till the end of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had actually prepared to introduce the compulsory 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 informed press reporters, adding the government was working to increase the necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a official, stated biodiesel manufacturers and fuel retailers will be given until Feb. 28 to adjust to the B40 mix. She stated the delay was because of technical challenges connected to aids for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil benchmark agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel manufacturers had actually said they were not able to draw up contracts for biodiesel distribution without the decree.

The biodiesel allocation for 2025 indicated a boost from 2024's estimated biodiesel intake of 12.98 KL, ministry information showed on Friday.

Of the overall allotment for this year, 7.55 million KL is for the public service responsibility (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 offered at market value. The non-PSO allotment is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the cost gap between the palm oil and nonrenewable fuel sources for the general allotment.

BPDPKS, the firm in charge of collecting and managing the palm oil funds, estimated in November B40 would need a 68% aid boost.

To help finance that, Indonesia plans to increase its export levy for unrefined palm oil (CPO) to 10% from the present 7.5%, but for that to take place, another main regulation is needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati