Biodiesel allowance decree was awaited by market

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

Palm oil benchmark agreement increased 1% after previous fall

Government aims 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 designating 15.6 million kilolitres (KL) of biodiesel for 2025 circulation, while providing the market up until 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 actually planned to launch the compulsory 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 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 given till Feb. 28 to adjust to the B40 mix. She said the hold-up was due to the fact that of technical obstacles connected to aids for the fuel.

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

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

The biodiesel allocation for 2025 showed a boost from 2024's estimated biodiesel consumption of 12.98 KL, ministry data showed on Friday.

Of the total 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 allocations will be cost market price. The non-PSO allowance is set at 8.07 million KL," Bahlil said, adding the fund might not subsidise the rate space between the palm oil and nonrenewable fuel sources for the overall allotment.

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

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