“It seems the realized consumption will be more than [initially estimated]. If it turns out to be higher, of course there will be an additional subsidy,” said the minister, referring to the targeted consumption of 36.5 million kiloliters as stated in the 2010 state budget revision.

The government has allocated Rp 88.9 trillion (US$9.78 billion) in fuel subsidies in the budget revision, based on the targeted consumption of subsidized fuels and an Indonesian Crude Price (ICP) of $80 per barrel.

There is an allocated fund of Rp 3 trillion to create a “fiscal risk cushion” in the budget revision that can be used for fuel subsidies, said Agus.

“There is also room in [the allocated] fuel subsidy for a lower ICP rate,” he said, adding that the ICP currently stands at about $72-73 per barrel.

A lower ICP rate means the Rp 88.9 trillion fuel subsidy can be used to fund more kiloliters of subsidized fuels.

Analysts have predicted that the government would not likely raise the price of subsidized fuels on fears it could accelerate inflation, therefore undermining economic growth, analysts predicted.

The last time the government raised fuel prices was on May 23, 2008, by an average 28.7 percent, due to the skyrocketing price of crude oil around the world.

Premium gasoline, for example, increased from Rp 4,500 to Rp 6,000 before returning to Rp 4,500 on the back of weakening crude prices, and again soaring on the back of 11 percent inflation rates.

This year the government expects inflation to reach 5.3 percent, and the economy to expand 5.8 percent.

Any increase in subsidized fuel costs is also likely to incite mass rallies across the country, which has in the past led to clashes between demonstrators and authorities.

A university student was killed in fuel subsidy clashes with police in 2008.

Currently, state-owned oil and gas firm PT Pertamina sells two types of subsidized fuels, Premium gasoline and Solar diesel, at Rp 4,500 per liter, according to the company’s website.

It also sells four types of non-subsidized fuels: Pertamax high performance gasoline at Rp 6,450 per liter; Pertamax Plus high performance gasoline at Rp 6,950; Bio Pertamax gasoline with 5 percent ethanol at Rp 6,950; and Pertamina Dex low-sulfur diesel at Rp 7,300 in the Greater Jakarta area.

Pertamina revises the price of its non-subsidized fuels every two weeks, on the first and 15th of every month.

Earlier, Energy and Mineral Resources Minister Darwin Zahedy Saleh said the government may implement a measure still under discussion at the ministry that would see a limit placed on the consumption of subsidized fuels.

Darwin estimated the consumption could reach 40 million kiloliters by the end of this year, increasing the nation’s fuel subsidy by between Rp 8 trillion and Rp 10 trillion.

The Energy and Mineral Resources Ministry is considering two policy options.

First, prohibiting all private cars produced after year 2000 from purchasing subsidized fuels; and second, banning sedans and predetermined “luxury” cars from buying such fuels.

Director general of oil and gas Evita H. Legowo said earlier the government was expected to complete formulating the options by July 9 and would further discuss them at the House of Representatives.

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