Biodiesel allowance decree was waited for by market

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

Palm oil benchmark contract 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 allocating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while offering the market until completion of next month to adjust to the higher level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to release the mandatory requirement of 40% palm oil fuel in biodiesel on Jan. 1, up from 35% now.

"The ministerial policy has actually 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 official, said biodiesel producers and fuel sellers will be offered until Feb. 28 to adjust to the B40 mix. She stated the delay was since of technical difficulties connected to aids 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 recovered by around 1%.

Fuel merchants and biodiesel producers had stated they were unable to prepare agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 suggested an increase from 2024's approximated biodiesel consumption of 12.98 KL, ministry information showed on Friday.

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

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

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

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)