Biodiesel allocation decree was awaited by market

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

Palm oil benchmark contract rose 1% after previous fall

Government intends 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 higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had planned to launch the compulsory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial guideline has been signed," the minister Bahlil Lahadalia informed reporters, including the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, stated biodiesel manufacturers and fuel retailers will be provided up until Feb. 28 to adapt to the B40 mix. She stated the hold-up was because of technical challenges 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 benchmark contract on Thursday. On Friday, it recovered by around 1%.

Fuel retailers and biodiesel manufacturers had said they were not able to prepare agreements for biodiesel distribution without the decree.

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

Of the overall allotment for this year, 7.55 million KL is for the general public service commitment (PSO), which covers sectors such as public transport, whose sales will be subsidised by the country's palm oil fund.

"The staying allocations will be offered at market rate. The non-PSO allowance is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the rate space in between the palm oil and fossil fuels for the total allocation.

BPDPKS, the company in charge of collecting and managing 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 crude palm oil (CPO) to 10% from the current 7.5%, however for that to happen, another main policy is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)