UPDATE 3-Indonesia pauses subsidies for palm oil biodiesel and replanting

(Adds comments from industry groups in paragraphs 9-11) By Bernadette Christina JAKARTA, Jan 16 (Reuters) - Indonesia is temporarily freezing the distribution of subsidies for mandatory palm oil biodiesel and replanting programmes due to a reorganisation at its palm oil fund agency, an official said on Thursday. The agency, BPDPKS, is undergoing changes after the management of cocoa and coconut funds came under its responsibility, official Achmad Maulizal said. The agency is in charge of collecting export levies for palm oil products and distributing the funds to help finance programmes such as mandatory biodiesel, replanting and research. The government had asked BPDPKS to help develop cocoa and coconut industries, including by financing replanting for both commodities, but details of the scheme have yet to be provided. "We are waiting for the new organisational structure work system," Maulizal said, adding he hoped the transition can be concluded as quickly as possible. Indonesia is also in transition into a higher mandatory blend of 40% palm oil fuel in biodiesel, known as B40, up from 35%. The agency in November warned that the higher mandatory blend would require a 68% subsidy increase. To ease to cost of funding the subsidies, the government said only around 7.55 million kilolitres (kl) out of a total of 15.6 million kl of biodiesel will be subsidised by the agency this year. The freeze in subsidies is not expected to affect biodiesel distribution as long as it does not last longer than three months, said Ernest Gunawan, secretary general of biodiesel producers association APROBI. "As long as our invoices are met within 90 days, it should be safe," he said. Gulat Manurung, chairman of palm oil smallholders association Apkasindo, said the group has not yet received information on the freeze, but said the government has allocated funds to replant 120,000 hectare area this year. (Reporting by Bernadette Christina Munthe, additional reporting by Dewi Kurniawati; writing by Fransiska Nangoy; editing by Martin Petty and Jason Neely) (([email protected];))