Govt eyeing legislation to limit fuel consumption

The Jakarta Post , Jakarta | Thu, 04/27/2006 10:55 AM | Business

Rendi Akhmad Witular, The Jakarta Post, Jakarta

With last year's voluntary energy conservation program having proved itself ineffective in reducing the consumption of oil-based fuels, the government is mulling the enactment of new legislation putting compulsory fuel-saving measures in place, a minister says.

The government will study legislation on energy conservation in other countries, including Japan, to ensure that the new Indonesian legislation is effective, State Minister for National Development Planning Paskah Suzetta said.

""The legislation will be discussed with the House of Representatives. Voluntary fuel conservation campaigns have not been effective. They need to be made compulsory,"" said Paskah after meeting Vice President Jusuf Kalla.

He reiterated that the government would renew its energy-conservation campaign this year through such things as restricting the use of private cars with engine capacities of above 1300 cc.

""The government hopes to reduce subsidized fuel consumption by between 30 percent and 35 percent this year through an intensive fuel-saving campaign,"" said Paskah, without going into the details.

Many countries have introduced energy conservation legislation that not only puts compulsory conservation measures in place but also introduces fiscal and financial incentives for factories and buildings to invest in energy conservation.

With global oil prices now hovering at above US$70 per barrel, the government is concerned that the allocated subsidy for oil-based fuels will be exceeded again this year, forcing the government to cut subsidy spending by raising fuel prices.

""There is no plan to raise fuel prices this year because the political, social and economic impacts would be so huge. We really need effective measures to reduce fuel consumption and ensure that the fuel subsidy allocation is sufficient,"" said Paskah.

In the 2006 budget, the oil price assumption was set at an average of $57 a barrel, and the oil production assumption at 1.05 million barrels a day. The average rupiah exchange rate, meanwhile, was set at Rp 9,900 per U.S. dollar.

Based on these assumptions, the government has allocated some Rp 54.3 trillion (US$6 billion) to subsidize oil-based fuels sold to private consumers this year. The allocation is intended to cover 41.5 million kiloliters of fuel.

Skyrocketing oil prices in the middle of last year resulted in a sharp slowdown in the Indonesian economy, Southeast Asia's largest, after the government decided to cut soaring fuel subsidy spending by raising fuel prices.

The lingering impacts of the decision are still being felt today in the form of high inflation and interest rates.

Meanwhile, Transport Minister Hatta Radjasa said his ministry would provide Rp 40 billion (US$4.4 million) this year to provide free converters to public transportation vehicles to allow them to switch from gasoline to compressed natural gas (CNG).

""The government will provide a subsidy for public transportation vehicles to convert to CNG, which is cheaper. In Greater Jakarta alone, as much as Rp 7 trillion is being wasted annually.""

Around 48 percent of subsidized oil-based fuels is consumed by the transportation sector.

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