Indonesia's higher biodiesel mandate has limited impact on palm oil prices

India to remain a major market for palm oil, say top Indonesian officials

Indonesia, one of the world’s largest producers of palm oil and a leading exporter to India, will raise its domestic palm oil blend for biodiesel from 40 per cent to 50 per cent starting January 2026.

 

The decision, announced earlier this year, has sparked uncertainty in global edible oil markets, with traders expecting crude palm oil (CPO) prices to rise in the New Year as domestic demand increases.

 

According to the Solvent Extractors’ Association of India (SEA), India imported around 13.92 million tonnes of edible oils between November 2024 and September 2025, with palm oil accounting for 50 per cent of the total — down from 56 per cent in the same period last year. The shares of soybean and sunflower oils rose to 50 per cent from 44 per cent, primarily due to relative pricing.

 

Indonesia remains India’s largest supplier of palm oil. Between November 2024 and September 2025, it exported about 2.65 million tonnes of crude palm oil and 0.83 million tonnes of refined palm oil to India, out of total palm oil imports of 6.9 million tonnes. The rest was sourced from neighbouring Malaysia.

 

In an interview with Business Standard, Eddy Martono, chairman of the Indonesian Palm Oil Association (IPOA), known locally as GAPKI, and Fadhil Hasan, head of its foreign affairs division, said the higher biodiesel mandate could modestly firm up palm oil prices but would not disrupt supply to India.

 

“No disruption expected in global supply”

 

Q1: Indonesia has raised its biodiesel mandate from 40% to 50%, which could reduce export surplus from 27–28 million tonnes to 22 million tonnes in 2026. How will this impact supply?

 

A (Martono): Indonesia’s decision to raise the biodiesel mandate from 40 per cent to 50 per cent reflects our commitment to strengthening national energy security and reducing dependence on imported fossil fuels.

 

While the B50 programme will increase domestic absorption and slightly moderate export volumes, the palm oil industry continues to expand capacity through yield enhancement, replanting, and sustainable cultivation. Hence, we do not expect any significant disruption in global supply.

 

“Prices may strengthen modestly”

 

Q2: How will this impact prices and supplies?

 

A (Hasan): Prices may firm modestly as domestic demand rises, but we expect them to stay within a healthy range, supported by balanced global demand, efficient stock management, and steady productivity improvements.

 

This policy enhances long-term stability for both domestic and international markets. Indonesia will remain a dependable and responsible supplier of palm oil while advancing its renewable energy goals.

 

“India will remain a priority market”

 

Q3: How much will India be affected if global supplies tighten?

 

A (Martono): India remains one of our most valued partners. In 2024, exports to India were around 4.8 million tonnes, projected to exceed 5 million tonnes in 2025. Even with the B50 programme rebalancing domestic allocation, shipments to India will continue to be prioritised.

 

India imports more than half of its edible oil requirement, with palm oil accounting for the largest share. Long-term demand is forecast at 7–8 million tonnes annually through 2030.

 

Indonesia’s proximity, with shipping times of 15–20 days from ports like Dumai and Belawan to Kandla and Haldia, ensures reliability compared to longer South American routes.

 

Coordinated policy dialogue between both nations will ensure India’s edible oil security even as Indonesia pursues domestic energy expansion.

 

“Prices may rise 10–15% in early 2026”

 

Q4: Will prices rise again from January 2026?

 

A (Hasan): After softening in late 2025, palm oil prices are expected to firm by up to 15 per cent in early 2026 as the B50 programme lifts domestic consumption and global demand for vegetable oils remains strong.

 

Indonesia, which contributes 46 per cent of global palm oil output and 55 per cent of exports, has the flexibility to meet both domestic biofuel needs and export obligations.

 

The government’s plan to introduce ethanol-blended gasoline by 2027, requiring around 1.4 million kilolitres of ethanol, underlines Indonesia’s broader energy diversification strategy.

 

Ongoing replanting, productivity programmes, and export duty adjustments will help ensure stable shipments and predictable pricing. Past biodiesel mandate transitions have shown that supply chains adapt smoothly without major disruption.

 

“Indian demand remains robust in 2025”

 

Q5: Will India’s palm oil imports remain strong for the rest of 2025?

 

A (Martono): The B50 mandate takes effect only in 2026. India’s current robust import levels reflect strong fundamentals, competitive prices, and inventory requirements. These factors are expected to sustain demand through the rest of 2025.

 

“B50 to strengthen Indonesia’s leadership in sustainable palm oil”

 

Q6: What does the higher biodiesel mandate mean for global palm oil supply in 2026?

 

A (Hasan): GAPKI sees the B50 policy as a forward-looking step that reinforces Indonesia’s leadership in sustainable palm oil production. Combined domestic and export demand is projected to reach 54 million tonnes by 2025, positioning Indonesia as a key player in the global renewable energy transition.

 

The industry aims to maximise yields from existing plantations, targeting 3.4 tonnes per hectare. Market strategies will remain aligned with global climate and energy priorities.

 

GAPKI’s objective is to balance domestic growth with export reliability, creating shared benefits for smallholders, rural communities, and downstream industries.

 

“As the B50 mandate unfolds, we remain committed to working with policymakers and trading partners to ensure responsible and inclusive growth,” Hasan said.