Govt mulls options on implementing fuel subsidy

The government looks to be undecided on a mechanism to implement the subsidized fuel restrictions scheduled to begin in April.

“There will be some problems if we want to ban all private cars from buying subsidized fuel. Not all car owners are rich. They cannot afford to buy unsubsidized fuel,” Energy and Mineral Resources Minister Jero Wacik told reporters after a meeting with the National Energy Council at his office in Jakarta on Wednesday.

Rich people might also evade the cap by procuring gasoline for motorcycles, which would not be covered by the new rules, for use in their cars, Jero said.

The government has proposed exempting users of motorcycles, public transportation vehicles and fishing boats from the fuel sales limits.

Jero said that while the ministry was still preparing a mechanism to reduce subsidized fuel use, the limits would be introduced in Jakarta in April and rolled out throughout Java and Bali by the end of the year.

Officials gave contradictory statements on the status of a revision of a 2006 presidential regulation on fuel prices expected to give a legal basis for the limits.

Jero said a draft revision was still at his office, while the ministry’s oil and gas chief Evita Herawati Legowo said the draft had been submitted to the Cabinet secretariat — which the secretariat claimed not to have received.

Despite concerns, Evita said she was optimistic that the government would be able to introduce the fuel subsidy restrictions in April in Jakarta. All needed infrastructure was in place, including assurances of an adequate supply of gas-based fuels, she said.

“All fuel stations in Greater Jakarta sell unsubsidized fuel. For gas, we already have 10 stations selling liquefied gas for vehicle [LGV] and in February, the number will be 19,” she said.

There are currently six stations selling compressed natural gas (CNG) in Greater Jakarta. The government plans to require all public transportation vehicles to use CNG, while private cars can choose non-subsidized fuels, such as CNG or LGV. The price of CNG has been set at Rp 3,100 per liter.

For public transportation vehicles, the government will give owners free converter kits to allow their vehicles to switch to gas-based fuels.

Officials were reportedly considering subsidizing conversion kits for private vehicle owners.

State oil and gas firm PT Pertamina announced that starting Jan. 10, the price of LGV would be increased to Rp 5,600 per liter, up from Rp 3,600, and include a subsidy of Rp 1,000 per liter.

“The subsidy has been fixed. The price will fluctuate based on the movement of the global oil prices,” Pertamina vice president for corporate communications Mochamad Harun said in a press statement.

Pertamina’s LGV sales currently top 24,000 liters a month.

According to the roadmap prepared by the government, the first phase will limit sales of the most popular fuel, Premium, in Java and Bali starting in Apri, followed by Sumatra in January 2013, Kalimantan in July 2013, Sulawesi in January 2014 and Maluku and Papua in July 2014.

Limitations on diesel fuel will go into effect in July 2013 for Java, Bali, Sumatra and Kalimantan, followed by Sulawesi in January 2014, and finally Maluku and Papua in July 2014.

The government’s plans still await approval by the House of Representatives.

Critics said it would be better for the government to raise Premium fuel by Rp 1,000 rather than implementing its fuel restriction plan.