Biodiesel allowance decree was waited for by market

Indonesia had prepared to release higher biodiesel mix on Jan. 1

Palm oil criteria 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 assigning 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the market until completion 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 planned to release 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 necessary biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel merchants will be provided up until Feb. 28 to adjust to the B40 mix. She said the hold-up was due to the fact that of technical difficulties 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 manufacturers had said they were unable to prepare contracts for biodiesel distribution without the decree.

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

Of the overall allowance for this year, 7.55 million KL is for the public service obligation (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the nation's palm oil fund.

"The staying allowances will be cost market value. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the rate space in between the palm oil and nonrenewable fuel sources for the total allotment.

BPDPKS, the company in charge of gathering and handling the palm oil funds, approximated in November B40 would require a 68% aid increase.

To help fund that, Indonesia plans 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 needed. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)