Lang
Indonesia's Minister of Energy and Mineral Resources signed a decree on Friday allocating 15.6 million kilolitres (KL) of biodiesel for distribution in 2025, while giving industry players until the end of next month to adapt to the higher fuel blend level.
Indonesia, the world's largest palm oil exporter, had planned to begin implementing the mandatory requirement to use 40% palm oil-based fuel in biodiesel from 1 January, up from the current 35%.
Minister Bahlil Lahadalia told reporters: "The ministerial regulations have been signed," adding that the government is working to raise the mandatory biodiesel blending ratio to 50% next year.
Eniya Listiani Dewi, a senior ministry official, explained that biodiesel producers and fuel traders will be given until 28 February to adapt to the B40 blend. She added that the delay was due to technical challenges related to the financial subsidy allocated for this fuel.
The failure to implement the mandate on 1 January caused a 2.6% drop in benchmark palm oil contracts in Malaysia on Thursday. On Friday, prices recovered by around 1%.
Fuel traders and biodiesel producers said they had been unable to sign biodiesel distribution contracts due to the absence of the decree.
According to ministry data released on Friday, the 2025 biodiesel allocation represents an increase compared with the estimated 2024 consumption of 12.98 million kilolitres.
Of the total allocation for this year, 7.55 million kilolitres has been earmarked for public service obligations (PSO), covering sectors such as public transport, with these volumes to be sold at subsidised prices from the country's palm oil fund.
Bahlil said: "The remaining allocation will be sold at market price. The non-PSO allocation has been set at 8.07 million kilolitres," adding that the fund cannot subsidise the price gap between palm oil and fossil fuel for the entire allocated volume.
BPDPKS, the agency responsible for collecting and managing palm oil funds, estimated in November that the B40 blend would require a 68% increase in subsidy funding.
To secure the necessary financing, Indonesia plans to raise export levies on crude palm oil (CPO) to 10% from the current 7.5%. However, this requires the issuance of another formal regulation.