Govt, House race to nip fuel crisis

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The government and lawmakers in the House are racing against time to forge a deal to boost Indonesia’s subsidized fuel quota to prevent nationwide fuel shortages.

The nation’s consumption of subsidized fuel topped 29 million kiloliters as of Aug. 30, or around 75 percent of the 40-million kiloliter quota defined in the state budget for 2012, according to information from state-owned oil company Pertamina.

The Energy and Mineral Resources Ministry previously estimated that the nation’s annual consumption of subsidized fuel might reach 44 million kiloliters by the end of 2012, which it attributed to soaring consumption of subsidized fuel in Indonesia’s most developed provinces, such as Jakarta.

According to Pertamina, monthly consumption of subsidized fuel in the capital in July exceeded the government’s quota by 34 percent in July and by 37 percent in August.

Jakarta will exceed its subsidized quota by the middle of September if current high levels of high consumption persist, meaning that there will be no subsidized fuel available for public sale in the capital.

To prevent a worst-case scenario, the government has asked the House to approve an increase of the fuel quota to fill the gap, as Pertamina will not be able to distribute subsidized fuel if the quota is exceeded.

Deputy Energy and Mineral Resources (ESDM) Minister Rudi Rubiandini said in Jakarta on Wednesday that there would be a shortage of subsidized fuel across the archipelago if lawmakers in the House failed to increase the quota from 40 million to 44 million kiloliters.

Large price disparities between subsidized and non-subsidized fuel have also exacerbated the situation.

Many motorists have switched from non-subsidized fuels such as Pertamax to subsidized gasolines such as Premium, leading to soaring demand for subsidized fuel in well-developed provinces, where a relatively more affluent populace owns a larger number of cars or motorcycles than those in more remote areas.

Poor oversight means that even the owners of luxury cars can buy subsidized fuel, which is sold for only at Rp 4,500 a liter, about half of the price of a liter of non-subsidized fuel.

Fuel subsidies have been a perennial political land mine in Indonesia.

The nation, once a member of the Organization of Petroleum Exporting Countries (OPEC), currently imports trillions of rupiah of worth of oil to fuel its economy, the largest in Southeast Asia.

Lawmakers in the House rejected a government plan in April to increase the price of Premium gasoline by 30 percent to Rp 6,000 per liter.

Analysts have said that continuing government subsidization of fuel prices was the root of the nation’s soaring consumption of fuel.

The subsidies have also led to ballooning government expenditures. The government has allocated Rp 274.74 trillion for energy subsidies in its proposed state budget for 2013, comprising Rp 193.8 trillion for oil subsidies and Rp 80.93 trillion for electricity subsidies.

On reducing subsidies, Rudi said it was “about time” for the price of subsidized gasoline to be increased. He proposed increasing subsidized fuel prices gradually, by Rp 500 a month, to give people a chance to adjust.

“If the price continues to remain at the same level, then we will continue to bump into the same problems in our [energy subsidy] cost-cutting mission,” Rudi said.

The deputy minister also claimed that a price increase would stimulate development of alternative fuels.

According to a consensus forged between the government and the House in April, fuel prices can only be increased if there is an increase by at least 15 percent in the Indonesian Crude Oil Price (ICP) over a six-month period.

However, the government will not be able to use the consensus to increase fuel prices as the ICP
has been almost flat. “The House should therefore give the government flexibility to deal with fuel prices,” Rudi said.

Satya W. Yudha, a lawmaker on House Commission VI overseeing energy, said on Wednesday that the commission was willing to increase the quota by 4 million kiloliters as the government has asked, as long as fuel distribution was better managed and segmented.

The commission would discuss the plan in its next meeting with the ministry on Monday, according to Satya.(sat)