Biodiesel allowance decree was waited for by market

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

Palm oil criteria agreement 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, 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 biggest exporter of palm oil, had actually prepared to introduce 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 press reporters, adding the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior official, said biodiesel manufacturers and fuel merchants will be given until Feb. 28 to adjust to the B40 mix. She said the hold-up was due to the fact that of technical difficulties connected to subsidies for the fuel.

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

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

The biodiesel allocation for 2025 suggested an increase from 2024's approximated biodiesel usage of 12.98 KL, ministry data showed on Friday.

Of the overall allotment for this year, 7.55 million KL is for the general public service obligation (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 cost. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund might not subsidise the price space between the palm oil and nonrenewable fuel sources for the total allowance.

BPDPKS, the company in charge of gathering and managing the palm oil funds, estimated in November B40 would require a 68% aid boost.

To assist finance that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the existing 7.5%, but for that to occur, another official regulation is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)