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Govt weighs $13b subsidy hike to keep fuel cheap
Indonesia may provide another Rp 200 trillion worth of subsidies if no decision is made to increase the price of subsidized fuel, as consumption is once again projected to exceed expectations.
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Finance Minister Sri Mulyani Indrawati speaks during a press conference at the G20 Finance Ministers Meeting in Nusa Dua, Bali, on July 16. (AFP/Pool/Sonny Tumbelaka)
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ndonesia may provide another Rp 200 trillion (US$13.43 billion) worth of subsidies if no decision is made to raise the price of subsidized fuel, as consumption is projected to exceed the quota set for the full year.
Finance Minister Sri Mulyani Indrawati told reporters on Tuesday that the hike would swell the subsidy and compensation budget by 40 percent to Rp 700 trillion.
While fiscal consolidation remains on track, the move would see the government take another chunk out of the state’s windfall revenue from commodity exports to keep fuel cheap.
The additional budget outlay would only cover additional consumption of Pertamina’s subsidized RON-90 fuel, Pertalite, and of its diesel brand, Solar, the minister noted, adding that, if the government included additional subsidies for electricity and liquified petroleum gas (LPG), a higher sum would be needed.
The latest estimates assume that Pertalite consumption will amount to 29 million kiloliters this year, up from the previously projected 23 million kl.
“This is what would happen if we do nothing. No sales restrictions, nothing, then the current Rp 502 trillion subsidy won’t be enough,” Sri Mulyani said, noting that the Rp 502 trillion was already triple the figure initially budgeted for this year.
Read also: Swelling fuel subsidy complicates fiscal consolidation
