InfoSAWIT, KUALA LUMPUR – The Indonesian government has decided to delay the implementation of the B50 biodiesel mandate this year, citing insufficient technical readiness and funding limitations—factors that analysts say highlight structural challenges in the national biodiesel program.
TA Securities Bhd (TA Research) said the decision reflects more than a timing issue, noting that Indonesia still faces key tasks such as stabilizing the domestic biodiesel fund, narrowing the widening cost gap between biodiesel and fossil diesel, strengthening logistics and infrastructure, and ensuring overall operational readiness.
“From a regional competitiveness perspective, our calculations show Malaysia has a competitive advantage in CPO exports, with lower export duties reducing costs and improving pricing flexibility,” TA Research wrote in its analysis, as quoted by InfoSAWIT from Theborneopost on Wednesday (Jan 21, 2026).
Indonesia, meanwhile, is seen under pressure due to higher export levies. While these levies support domestic subsidies, they also raise export costs and may limit price competitiveness in global markets.
Media reports said Indonesia postponed the 50% biodiesel blend mandate due to technical readiness and limited funding. Previously, the country had planned to enforce B50 starting in the second half of 2026 (2H26).
At the same time, Indonesia is continuing plans to raise its palm oil export levy from 10% to 12.5% starting March 1, 2026, a move expected to strengthen fiscal revenue while supporting broader policy objectives.
TA Research said it was not surprised by the development, as concerns over subsidy adequacy have been rising—driven by the widening price gap between biodiesel and fossil diesel and reports of a fiscal deficit in 2024.
Based on Bloomberg biodiesel profitability data, Indonesia’s biodiesel margins over the past decade were described as highly volatile and dependent on subsidies. Between 2015 and 2017, margins were mostly negative, then improved to positive in 2018–2019, before weakening again in 2020–2021 amid low global oil prices.
Margins surged in 2022 during the global energy crisis, but normalized near break-even in 2023–2024, before returning to losses in 2025 through early 2026, hovering around minus US$200.
This indicates the Indonesian government currently needs to provide subsidies of around US$200 per ton of biodiesel to cover the cost gap.
“Overall, Indonesia’s biodiesel program remains structurally unprofitable without subsidies. Higher blending mandates could increase subsidy requirements and raise fiscal risks,” TA Research said.
In terms of market competition, TA Research estimated Malaysia’s lower CPO export duties provide a cost advantage of about US$103.2 per ton compared with Indonesia’s 12.5% export levy.
The cost gap not only reduces Malaysia’s effective export costs, but also provides greater pricing flexibility in international markets.
As a result, Malaysian exporters are seen having stronger opportunities to capture market share, particularly in price-sensitive markets such as India. Indonesia, meanwhile, faces a dilemma between maintaining levy contributions to fund domestic biodiesel subsidies or preserving competitiveness in global markets. (T2)
