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Analysis: Govt plans to limit consumption of subsidized fuels, again
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Motorists queue at a petrol station in Jakarta on September 3, 2022, as the government announced an increase in the price of subsidized fuel from Rp 7,650 (0.51 USD) to Rp 10,000 (0.67 USD). (AFP/Bay Ismoyo)
T
he discourse on limiting the use of subsidized fuel brands Pertalite gasoline and Solar diesel has been a long-running debate under President Joko “Jokowi” Widodo’s administration. This time the government plans the limitation of Pertalite to take place on Oct. 1, 2024. President Jokowi’s stance has been indecisive regarding this matter, confusing the public once again.
The government plans to limit Pertalite for cars with a maximum engine capacity of 1,400 cc, motorcycles with a maximum engine capacity of 250 cc and Solar for maximum 2-liter diesel engine capacity vehicles. The implementation of subsidized fuel restrictions was previously scheduled to coincide with Indonesia’s Independence Day, back on Aug. 17, 2024. Despite initial plans, President Jokowi himself delayed the implementation, worrying that it could lower his popularity toward the end of his term.
Newly appointed Energy and Mineral Resources Minister Bahlil Lahadalia has announced plans to implement fuel subsidy restrictions beginning Oct. 1. Even with the new restrictions, there will be no price increases for subsidized fuels. The restrictions will be included in an Energy and Mineral Resources Ministerial Regulation.
The government believes that limiting the purchase of Pertalite fuel will not have a significant impact on consumers’ purchasing power. By implementing stricter eligibility requirements for Pertalite and subsidized diesel fuel Solar, President Jokowi seems to be paving the way for the next government to be able to allocate money for other purposes, especially the budget for the “free lunch” program for students.
The government has set a higher energy subsidies budget for 2025 at Rp 204.3 trillion (US$13.25 billion), up from Rp 186.9 trillion in 2024. But the increase in subsidies will be mainly for electricity, at Rp 90.2 trillion, up from Rp 73.6 trillion, while subsidies for fuels and liquefied petroleum gas (LPG) will remain relatively the same at Rp 113.7 trillion, of which Rp 87.6 trillion will go to LPG, and only Rp 26.7 trillion for subsidized fuels.
President Jokowi explained that this restriction is intended to improve the effectiveness of the state budget while reducing air pollution in Jakarta. Currently, Indonesia uses Euro 4 emission standards, while other countries have used Euro 5 or even Euro 6 standards. Pertalite fuel has a research octane number (RON) of 90 and does not abide by the rules of the Euro 4 standard of RON 91. Pertamina aims to replace Pertalite with a greener option of Pertamax Green 92. The composition of Pertamax Green 92 will be a mix of fuel with RON-90, along with 7 percent ethanol.
What we’ve heard
