InfoSAWIT, JAKARTA – The planned implementation of Indonesia’s B50 biodiesel mandate in the second half of 2026 must be accompanied by significant improvements in the upstream palm oil sector, according to an academic assessment.

Dilansir InfoSAWIT from Antara, on Tuesday (April 7, 2026), Dr. Eugenia Mardanugraha of the University of Indonesia emphasized that productivity gains are essential to balance rising domestic and global demand.

“Palm oil productivity must increase to keep pace with growing demand for domestic consumption, including biodiesel, as well as exports,” she said.

Strengthening Upstream Fundamentals

Eugenia highlighted the need for policies focusing on replanting programs, improved seed quality, efficient cultivation practices, and stronger support for smallholders.

She noted that without these improvements, supply pressures could intensify, potentially creating imbalances between domestic needs and export commitments.

Risk of Supply Competition

The researcher also warned of potential “crowding out,” where CPO allocation may face competition between export markets and domestic mandates.

If B50 is implemented prematurely, export volumes may decline as domestic priorities take precedence. Additionally, volatile crude oil and CPO prices add complexity to policymaking.

Reforming Domestic Market Obligation (DMO)

Eugenia suggested that Indonesia’s Domestic Market Obligation (DMO) policy should be strengthened and repositioned as a firm domestic-first requirement.

“Producers should be required to allocate a fixed volume for domestic needs at regulated prices, independent of export decisions,” she explained.

She also proposed a performance-based mechanism, where producers with higher output and exports receive more flexible DMO ratios.

Such reforms would allow DMO to function not only as a supply control tool but also as a driver for increased production and balanced market distribution. (T2)