Minister Expects Unchanged Diesel Price Despite Subsidy Cut

Fuel tank drivers wait to load their cargo at a state-owned Pertamina fuel depot in Jakarta in this 2014 file photo. Energy and Mineral Resources Minister Sudirman Said expects the price of diesel to remain unchanged until the end of the year despite a plan to reduce fixed fuel subsidies. (Reuters Photo/Darren Whiteside)

By : Tabita Diela | on 10:09 PM June 14, 2016
Category : Business, Economy

Jakarta. Energy and Mineral Resources Minister Sudirman Said expects the price of diesel to remain unchanged until the end of the year despite a plan to reduce fixed fuel subsidies as part of the government's efforts to keep the state budget in check.

"We have made our calculation and prediction. We hope that we don't see a higher price toward the end of the year," Sudirman told reporters on Tuesday (14/06).

According to the ministry's statement earlier this month, the price for subsidized diesel is Rp 6,900 (52 US cents) per liter — including taxes and subsidies.

Sudirman based his calculation on the assumption that the government will cut the subsidy for diesel fuel to Rp 350 per liter from the current Rp 1,000 per liter — as stated in the 2016 revised state budget.

The plan, however, is subject to change as House of Representatives Commission VII, which oversees energy affairs, decided in a meeting on Monday that the subsidy for diesel will be Rp 500 per liter. The energy minister did not attend the meeting.

The government decided to increase the total subsidy amount to Rp 188.7 trillion in the revised 2016 state budget from the previous Rp 182.6 trillion, with bigger subsidies on electricity, food, fertilizers, public services and tax subsidies.

The total subsidy for fuel will be cut by 4.2 percent to Rp 97.8 trillion from Rp 102.1 trillion previously, while the subsidy for diesel and 3-kilogram liquid petroleum gas canisters will be cut by 36.2 percent to Rp 57.2 trillion.

However, counter to Minister Sudirman's assertion, Coordinating Economics Minister Darmin Nasution said on Monday that lowering the subsidy would indeed result in an increase in the price of diesel fuel. He did not give any estimation of the expected price.

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