Govt in talks to raise fuel subsidy

Alfian , The Jakarta Post , Jakarta | Sat, 07/19/2008 11:02 AM | Business

The government is likely to further raise its budget allocation for fuel subsidies this year as annual fuel consumption is estimated to surpass initial expectations.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said in Jakarta on Friday that his office was already engaged in talks with the Finance Ministry on the possibility of raising fuel subsidies.

Increasing fuel subsidies is necessary, he said, as the total fuel consumption in the first semester has already reached 63 percent of the 35 million kiloliters of fuel estimated in the revised 2008 state budget.

The revised-2008 state budget allocates Rp 126.86 trillion for fuel subsidies and prepares Rp 8.25 trillion as an energy fund.

In this year's first semester, Rp 60.5 trillion was spent on subsidized fuel.

"We are still in the middle of a discussion and will continue to monitor the latest developments (on fuel consumption)," Purnomo said.

Downstream oil and gas regulator BPH Migas chairman Tubagus Haryono said first semester consumption was 10.94 percent higher than the allocation quota for the period, which is 17.5 million kiloliters.

BPH Migas committee member Adi Subagyo said if the consumption level stayed the same, total fuel demand for the year could reach up to 40 million kiloliters.

He said one main reason for the increase in consumption was that many vehicle users had started using subsidized Premium fuel after previously using non-subsidized Pertamax and Pertamax due to price hikes.

State oil and gas company Pertamina previously raised the price of Pertamax by Rp 300 per liter to Rp 10,600 per liter. With subsidies, Premium fuel is sold at Rp 6,000 per liter.

He also said increased public activity during the election period, which began last week, would raise fuel consumption 10 percent.

"Therefore, we are planning to propose additional supply for fuel subsidies," Adi said.

Pertamina's president director Ari Soemarno said the company had prepared for increased demand for premium by adding premium national stock.

"We will increase our premium stock to 22.3 days-worth, up from 19 days to anticipate high demand for premium," Ari said.

He said concerns over blackouts in greater Jakarta and Tangerang had lead many to buy premium for generators, thus further pushing up consumption at the pump.

Adi Subagyo of BPH Migas said tobacco harvesting in West Nusa Tenggara, Bali, Madura, Central and East Java was also contributing to the high consumption of subsidized fuels.

"They are harvesting their tobacco at the moment and consume a lot of fuel," Adi said.

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