Biodiesel allotment decree was awaited by market

Indonesia had prepared to launch greater biodiesel mix on Jan. 1

Palm oil benchmark agreement increased 1% after previous fall

Government goes for 50% biodiesel mix in 2026

(Recasts with energy minister's comment)

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 up until the end of next month to adapt to the greater level of the fuel in the mix.

Indonesia, the world's biggest exporter of palm oil, had prepared to release the necessary 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 reporters, adding the government was working to increase the mandatory biodiesel mix to 50% next year.

Eniya Listiani Dewi, a ministry senior authorities, said biodiesel manufacturers and fuel sellers will be given until Feb. 28 to adapt to the B40 mix. She said the delay was since of technical difficulties linked to subsidies for the fuel.

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

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

The biodiesel allowance for 2025 suggested a boost from 2024's estimated biodiesel usage of 12.98 KL, ministry data revealed on Friday.

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

"The staying allotments will be cost market cost. The non-PSO allocation is set at 8.07 million KL," Bahlil said, including the fund could not subsidise the rate space between the palm oil and nonrenewable fuel sources for the general allowance.

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

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