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View all search resultsGovt doubles down on fuel subsidies, cuts airfare VAT
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A Citilink plane taxis as a Super Air Jet lands at Soekarno-Hatta International Airport in Tangerang, Banten, on Jan. 10, 2025. (AFP/Bay Ismoyo)
T
he government says prices of subsidized gasoline and diesel will stay fixed even if global oil prices remain elevated, while airlines will be allowed to lift airfares, but without excessively hurting consumers.
Coordinating Economy Minister Airlangga Hartarto said in a press conference on Monday that, so long as oil did not average more than US$97 per barrel for the year, subsidized fuel prices “could stay in place until December” to “maintain economic stability and purchasing power”.
The United States-Israeli war on Iran has sent the price of oil up sharply after Tehran blocked most maritime traffic through the Strait of Hormuz.
Brent crude traded near $108 per barrel on Monday afternoon, up sharply from about $60–$70 before the first missile was fired on Feb. 28. Prices have remained volatile since the war began and well above the $70 per barrel assumption in Indonesia’s state budget, forcing the government to spend more on subsidies than originally allocated.
Finance Minister Purbaya Yudhi Sadewa said the budget could shield consumers even if oil averaged $100 per barrel in 2026, noting cuts could be made to other expenditure items to spend more on fuel subsidies.
Airlangga said last week that the government had identified Rp 130 trillion ($7.63 billion) of potential savings but did not specify where spending may be slashed.
Dolfie Othniel Frederic Palit, deputy chair of House of Representatives Commission XI, which oversees financial affairs, said in a public hearing on Monday that an average oil price of $100 would add Rp 204 trillion to the state’s subsidy bill, suggesting that, even with Rp 130 trillion in savings, a gap of Rp 74 trillion would remain.
