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Energy Minister signals more price hikes for fuel, electricity
The price adjustments are part of the government's strategy to reduce fiscal pressures as global commodity prices surge.
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Motorcycles line up for Pertamax fuel oil in this undated photograph. (Pertamina/Pertamina)
T
he Energy and Mineral Resources Ministry has revealed plans to raise the prices of subsidized energy commodities to minimize fiscal strains amid surging international oil prices induced by the Russian invasion on Ukraine.
Energy Minister Arifin Tasrif said on Wednesday that the “adjustments” would apply to Pertalite gasoline, Solar diesel, kerosene and 3-kilogram liquefied petroleum gas (LPG) cylinders. These subsidized fuels are widely used by lower-income homes and businesses.
“We will keep an eye on the developments in the geopolitical conflict. If it keeps going on, it could trigger further hikes in oil prices, which the state budget may not be able to cover. Therefore, we need to recalculate prices again,” Arifin told lawmakers.
The government will also raise electricity prices through a tariff-adjustment mechanism that will allow state-owned electricity company PLN to set prices based on global market conditions. Regulations have barred PLN from exercising the policy since 2018.
“In the short term, the plan to have a tariff adjustment in 2022 [on electricity] could save the state budget Rp 7 trillion [US$487.75 million] to Rp 16 trillion in compensation,” he said.
Read also: High oil prices put new strains on state budget
Compensation is used to cover the difference between government-set energy prices and market prices. The funds are disbursed to state-owned enterprises in the months after the year ends.
