Biodiesel allocation decree was awaited by industry

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

Palm oil criteria agreement increased 1% after previous fall

Government aims for 50% 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 distribution, while offering the market up until completion of next month to adjust to the greater level of the fuel in the mix.

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

"The ministerial guideline has actually been signed," the minister Bahlil Lahadalia informed press reporters, adding the federal government was working to increase the obligatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel producers and fuel merchants will be offered until Feb. 28 to adjust to the B40 mix. She said the hold-up was since of technical challenges linked to subsidies for the fuel.

The non-implementation on Jan. 1. had led to a 2.6% drop in the Malaysian palm oil standard contract on Thursday. On Friday, it recovered by around 1%.

Fuel sellers and biodiesel manufacturers had said they were not able to draw up agreements for biodiesel distribution without the decree.

The biodiesel allowance for 2025 showed a boost from 2024's estimated biodiesel intake 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 responsibility (PSO), which covers sectors such as mass transit, whose sales will be subsidised by the country's palm oil fund.

"The remaining allowances will be offered at market value. The non-PSO allotment is set at 8.07 million KL," Bahlil stated, including the fund could not subsidise the cost gap in between the palm oil and fossil fuels for the total allowance.

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

To assist fund that, Indonesia prepares to increase its export levy for crude palm oil (CPO) to 10% from the current 7.5%, but for that to happen, another main guideline is required. (Reporting by Bernadette Christina Munthe, Fransiska Nangoy, Dewi Kurniawati; editing by John Mair, Savio D'Souza, Shri Navaratnam and Barbara Lewis)