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Cleaner fuel rollout won’t raise prices, govt promises
The government has stated that the introduction of cleaner – and costlier – fuel later this year will not necessitate price hikes or put further strain on the state budget. Instead, the rollout will be financed by preventing wealthier consumers from purchasing subsidized fuel.
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Motorcyclists line up on Sept. 3, 2022 to fill their tanks at a gas station in Jakarta. The government increased subsidized fuel prices that year by around 30 percent. (AFP/Bay Ismoyo)
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he government says the introduction of cleaner, and costlier, fuel later this year will not lead to price hikes or put further strain on the state budget, as the rollout will be financed by savings made via restricting wealthier consumers from purchasing subsidized fuel.
“The plan is to provide fuel with lower sulfur content without increasing prices. This way, the public can have access to cleaner, better fuel in the market,” Rachmat Kaimuddin, undersecretary for transportation and infrastructure at the Office of the Coordinating Maritime Affairs and Investment Minister, told a press briefing on Thursday.
Rachmat acknowledged the government would need to address the additional costs state-owned oil company Pertamina would incur from producing cleaner fuel, and to avoid bloating the state’s already-high energy subsidy bill.
According to him, the government has a plan to prevent wealthier individuals from purchasing subsidized fuel.
The proposed restriction would apply to vehicles with an engine capacity larger than 1,400 cubic centimeters (cc), Rachmat said, but media reports noted that less than 7 percent of vehicles on the country’s roads today fit this criterion.
“We are aware that the current fuel subsidy system lacks proper targeting. So along with the cleaner fuel rollout, we also aim to fix this issue to ensure the cost burden does not fall on the general public [through higher prices] or on the state budget [through increased subsidy spending],” he said.
Rachmat added that the new “targeted distribution” scheme for subsidized fuel would be applied to diesel first and then to gasoline, but he did not reveal details on how this would be implemented on the ground.
