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Govt estimates lower subsidy spending amid global decline in gas price
The declining trend has eased the government's gas subsidy burden, which may also prompt the ministry to maintain the current indirect distribution of subsidized gas instead of switching to the direct subsidy distribution it had planned for 2020.
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Residents of Kebon Kelapa in Bogor, West Java, line up to purchase the 3-kilogram canisters of subsidized liquefied petroleum gas (LPG) on Dec. 5, 2017. (kompas.com/Ramdhan Triyadi Bempah)
The government expects to spend less on this year's subsidy for 3-kilogram canisters of liquefied petroleum gas (LPG) amid the declining trend in the global gas price.
Energy and Mineral Resources Minister Ignasius Jonan said on Monday during a House of Representatives hearing that the price of CP Aramco – the global benchmark for LPG – had fallen 40 percent since October 2018.
"Last October, CP Aramco was US$655 per ton, but now it is $375 per ton, or down $280. This is half the price. At the recent Cabinet meeting, we were still undecided whether to make a price adjustment or not," he said.
Assuming that the gas price continued to hover around $375 until December, the ministry estimated it would spend Rp 44.16 trillion on the subsidy for 3 kg LPG canisters, about half the Rp 75.22 trillion budgeted for this year.
Government spending on the 3 kg LPG subsidy reached Rp 19.2 trillion in May for 2.8 million metric tons (MT) of gas, or 40 percent of the 2019 subsidy allocated for 6.9 million MT of gas.
"Our 2019 subsidy is safe," said Jonan, indicating that spending would not exceed the budget. "Now, the question is whether the pricing formula for our subsidized LPG is still relevant or not," he added.
