Analysts: Downstream palm oil operators to benefit from Indonesia’s additional B30 funding

SINGAPORE (May 19): Following the recent announcement of renewed government funding for Indonesia’s B30 Biodiesel programme, CGS-CIMB analysts Ivy Ng and Nagulan Ravi have maintained their “neutral” call on upstream planters despite a positive outlook for downstream players due to a widening export levy between crude (CPO) and processed palm oil (PPO). 

On May 18, Indonesia’s Finance Minister Sri Mulyani announced a renewal of the country’s B30 biodiesel mandate with a Rp2.78 trillion ($266.2 billion) government earmark and an increased palm oil export levy of US$5 ($7.10) to fund the programme. The scheme is expected to raise Rp3.54 trillion to maintain a 30% biodiesel blend in Indonesian diesel. 

The B30 programme -- launched last December -- represents the highest mandatory mix in the world. The rationale of this requirement was to reduce carbon emissions, as well as Indonesia’s reliance on fuel imports. The government was considering a further B40 programme despite questions about the feasibility and logistics of such a requirement, though this has been postponed indefinitely owing to the Covid-19 pandemic.