Sunday, May 28, 2023

Gov’t Mulls Fuel Price Hikes as Energy Subsidies Set to Top $34b

Lenny Tristia Tambun
August 13, 2022 | 11:08 am
A car refuels at Pertamina gas station in Senen, Central Jakarta. (Antara Photo)
A car refuels at Pertamina gas station in Senen, Central Jakarta. (Antara Photo)

Jakarta. The government is considering raising the prices of subsidized fuel products to ease pressures on the state budget after it revealed that the cost to keep fuels and electricity affordable may exceed the ceiling budget of Rp 502 trillion ($34 billion).

In a high-level meeting with the leaders of the legislature and judicial agencies on Friday, President Joko “Jokowi” Widodo indicated that the spending on energy subsidies couldn’t go any higher.

"Please find any other country where Rp 502 trillion is spent on subsidies … this amount is huge but can we stand with this?" the president said after the meeting at the State Palace in Jakarta.

"It’s okay if we can shoulder that because it means the people don’t have to take the load. But what if the state budget can’t stand any longer?”


Present at the meeting were People’s Consultative Assembly Speaker Bambang Soesatyo, House of Representatives Speaker Puan Maharani, Regional Legislative Council Speaker La Nyalla Mattalitti, Supreme Audit Agency Chairman Isma Yatun, Constitutional Court Chief Justice Anwar Usman, Supreme Court Chief Justice M Syarifuddin, and Judicial Commission Chairman Mukti Fajar Nur Dewata.

While the vast majority of countries around the globe have to deal with unprecedented rises in fuel prices, Indonesian vehicle owners can buy subsidized gasoline product at half a dollar per liter.

“We are being faced with global food, energy, and financial crises,” Jokowi said.

The government controls the prices of subsidized fuel products, liquefied petroleum gas, and electricity for the poor. However, fuel products like Pertalite and diesel fuel Dexlite have benefited mostly car owners who shouldn’t be categorized as low-income families, critics have said.

On Wednesday, Finance Minister Sri Mulyani Indrawati said the current energy subsidies allocation is already Rp 350 trillion more from the initial target.

Part of the subsidies is allocated to supply 23 million kiloliters of Pertalite throughout the year but the total consumption of the cheap gasoline product is estimated to reach 28 million kiloliters by the end of the year.

“So there will be extra spending apart from the Rp 502 trillion subsidies,” she said.

In addition to the sharp increase in domestic fuel consumption, a weaker rupiah against the dollar and soaring global oil prices also add pressures on the state budget, the minister said.

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