Govt spending for 2010 fuel subsidy below initial projection

Although realized consumption of subsidized fuels exceeded the 2010 quota, the government estimates that actual subsidy expenditures may have been around Rp 13.6 trillion (about US$1.5 billion) lower than an initial forecast because of lower than anticipated average crude prices.

The revised 2010 state budget law allocated Rp 74.6 trillion for fuel subsidies, including the subsidy for biofuel, but spending realization only reached 61 percent of the total by the end (of 2010), state budget policy center chief Askolani told reporters at the Finance Ministry on Tuesday.

“There were savings from the fuel subsidy because the actual average oil price was lower than our assumption. The revised 2010 state budget set the average crude price assumption at US$80 per barrel in 2010, while the average realized price until the end of this year [2010] was only US$79.39 per barrel.” Askolani said.

Indonesia subsidizes three oil-based fuels: premium gasoline, kerosene and diesel. The revised 2010 state budget had capped subsidized fuel consumption at 36.5 million kiloliters, but realized consumption by the end of the year reached 38.5 trillion kiloliters.

The lower subsidy spending was also caused by the strengthening rupiah in 2010, Askolani added. The state budget set the rupiah assumption at Rp 9,200 per US dollar, but the average realization was only at Rp 9,087 per US dollar.

The lower fuel subsidy realization helped the government save about Rp 4 trillion in total spending for energy subsidies allocated within the state budget plan.

The government spent Rp 94.6 trillion for energy subsidies in 2009. The government has allocated Rp 136.6 trillion for energy subsidies in the 2011 state budget. The comprehensive energy subsidy covers subsidized fuels (including biofuel), three kilograms LPG canisters and electricity.

Regarding subsidized fuels, premium gasoline consumes the largest portion of the subsidy, accounting for around 60 percent of the total.

In an effort to cope with the state budget deficit, the government and the House of Representatives have agreed to restrict sales of subsidized fuels to private cars starting in April this year. With the restriction, the fuel subsidy allocated for this year would not exceed the state budget quota of 38.5 million kiloliters, Askolani said.

The directorate general for oil and gas at the Energy and Mineral Resources Ministry said the policy would first be tested at six fuel stations in Jakarta. The policy will be further expanded to all of Java and Bali in July, followed by Sumatra in July, 2012, Kalimantan by January 2013 and Sulawesi by July 2013.