19/04/2016 (Reuters) - Indonesia state oil company Pertamina and AKR Corporindo will buy up to 1.6 million kilolitres of unblended biodiesel for May to October, the head of the country's biodiesel subsidy program operator said Monday.

That's down from the 1.87 million kilolitres (kl) in supply quotas the two companies awarded for November 2015 to April this year.

The decline follows slumping demand for biodiesel from the transportation sector, Bayu Krisnamurthi, the head of Indonesia's Estate Crop Fund agency told reporters.

The Estate Crop Fund agency is in charge of Indonesia's biodiesel subsidies and oversees how much unblended biodiesel is procured for domestic consumption. Pertamina and AKR report their biodiesel sales to the Fund to reimburse the subsidies.

Unblended biodiesel, or palm methyl ester (PME), is the raw component of finished biodiesel. Indonesia's consumption of unblended biodiesel in 2015 declined to 863,000 kl from 1.78 million kl in 2014. Last week, officials at the energy ministry said Indonesia could miss its 2016 target.

The decline in the biodiesel buying is in spite of Indonesia, the world biggest palm oil producer, requiring a 20 percent blend of biodiesel into domestic gasoil supplies in 2016 as it aims reduce its crude oil import bill, cut greenhouse gas emissions and create more demand for the edible oil.

In the future, the Fund will subsidise biodiesel consumed by state electricity company Perusahaan Listrik Negara (PLN) amid growing demand for biodiesel for power generation, Krisnamurthi told reporters.

"It has been confirmed that fuel for PLN will be supported with palm funds," he said.