Jakarta. President Joko "Jokowi" Widodo has instructed his cabinet ministers to keep prices of subsidized fuel and electricity stable until the end of 2019 in a bid to maintain national purchasing power, Energy and Mineral Resources Minister Ignasius Jonan said on Monday (05/03).
"President [Joko Widodo] recognized that the people’s purchasing power must be maintained at its current level at the very least, or even increased, so we will not increase electricity prices," Ignasius told reporters at a press conference in Jakarta.
Household consumption, which accounts for half of Indonesia's economy, has been subdued in the past few years as Jokowi's preference to boost infrastructure development siphoned funds previously used for providing cheap fuel and electricity.
Jokowi is set to battle for his second term in the general elections next year, and should feel pressure to accelerate economic growth, which is still far from the 7-percent pace he promised during his first presidential campaign in 2014.
To achieve that goal, officials plan to finalize a government regulation that will cap domestic coal prices for electricity within the next week.
"It will regulate the price of coal used for the purposes of electricity, so that we can maintain the current price of electricity until the end of 2019, and minimize the loss for PLN [Perusahaan Listrik Negara]," Ignasius said, referring to the national utility company.
Furthermore, the government will also try to maintain the prices of premium gasoline and diesel.
"We will try to maintain the people’s purchasing power, so until the end of 2019 there will be no increase to the price of subsidized fuel and electricity," secretary general of the Ministry of Energy and Mineral Resources, Ego Syahrial, said.
The government plans to increase subsidies allocated for diesel and will discuss the matter further with Commission VII at the House of Representatives, he added.
In 2017, the government spent Rp 97.6 trillion ($6.87 billion) on energy subsidies, compared with Rp 341.8 trillion in 2014. State spending on infrastructure has risen more than 80 percent to Rp 376.1 trillion in the same period.
The proposal to retain fuel and electricity prices at current levels will not disrupt budgetary reforms, Finance Minister Sri Mulyani Indrawati said on Tuesday, adding the budget deficit for this year could still be kept under 2.2 percent of the gross domestic product.
Ego said there will be no change in prices of RON 88 gasoline for 2018 and 2019. The fuel is currently not subsidized, but prices are set by the government every three months.
He also said the government will seek parliamentary approval to raise diesel subsidies to between Rp 700 and Rp 1,000 per liter, from the current Rp 500.
The energy ministry has estimated that electricity subsidies will have to be increased by around Rp 5 trillion in 2018.
Additional reporting by Reuters