JAKARTA Indonesia is carrying out tests ahead of plans by the incoming government to increase the palm oil-based biodiesel blending mandate to 50%, from 35% now, a government official said, raising industry concerns over supplies for exports.

Under its 'B35' programme, Indonesia already has one of the world's highest biofuel mix mandates. The outgoing government of President Joko Widodo has plans to raise this to B40 next year.

Prabowo Subianto, who will take over from Widodo in October after winning the February election, has pledged to raise the mandate further to B50 to reduce oil imports, without setting a timeline.

Ahead of the presidential transition, the current administration has ordered the palm oil industry to prepare for B50 and conduct tests.

"A static test for B50 composition is being carried out by the energy ministry and several stakeholders," director general of renewable energy at the energy ministry Eniya Listiani Dewi told Reuters on Wednesday.

That will be followed by vehicle road tests, in a process that typically takes a year, she said, adding that the agriculture ministry is assessing palm oil supplies.

Indonesian biofuel producers association APROBI said B50 would require the industry to invest in new processing capacity.

Indonesia's biggest palm oil producers association GAPKI has warned that a higher mix could hurt exports amid stagnating production.

Domestic palm oil consumption has grown 7.6% on average since 2019, according to GAPKI, driven in part by policies including biodiesel mandates and compulsory domestic sales for cooking oil.

Over the same period, output has risen less than 1% annually in Indonesia, the world's top producer and exporter of palm oil.

"As current production rate has stagnated, it is better to maintain B35, and if gasoil (diesel) is cheaper, why should we force ourself?" GAPKI Chairman Eddy Martono told Reuters.

GAPKI has also questioned the wisdom of plans to implement the B40 mandate in 2025, suggesting that authorities only raise the mix if export prices are less profitable.

The B35 mandate will use 11 million metric tons of crude palm oil (CPO) this year, rising to 14 million tons under B40, according to APROBI.

B50 will consume an estimated 18 millions tons of CPO, which could hurt domestic cooking oil prices and exports, as well as government revenues from exports, Martono said.

He urged government to improve production by accelerating a smallholders replanting programme or setting up a dedicated area for biodiesel feedstock before raising the mandate further.

  - Reuters