Biodiesel allocation decree was awaited by market

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

Palm oil benchmark agreement increased 1% after previous fall

Government aims for 50% 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the industry till completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's largest exporter of palm oil, had 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, including the federal 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 retailers will be offered up 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 resulted in a 2.6% drop in the Malaysian palm oil criteria agreement on Thursday. On Friday, it recuperated by around 1%.

Fuel sellers and biodiesel producers had said they were not able to prepare contracts for biodiesel circulation without the decree.

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

Of the total allotment 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 country's palm oil fund.

"The remaining allocations will be cost market cost. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, adding the fund might not subsidise the price gap in between the palm oil and fossil fuels for the overall allowance.

BPDPKS, the firm in charge of gathering and handling the palm oil funds, estimated 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%, however for that to happen, another official guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; modifying by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)