Finance Minister Sri Mulyani Indrawati told lawmakers on Monday that the funds were to cover capital that the consortium of four state-owned enterprises comprising the Indonesian side had failed to put up at the beginning of the project in 2015.

The largest equity commitment was from state-owned plantation company PTPN VIII with Rp 3.1 trillion, followed by state-owned toll road operator Jasa Marga with Rp 540 billion, state-owned railway company PT Kereta Api Indonesia (KAI) with Rp 440 billion and state-owned construction company Wijaya Karya with Rp 240 billion.

“At the time, these four SOEs were confident that they could provide the required base equity. In reality, they were unable to deposit it,” Sri Mulyani said during a hearing at the House of Representatives, adding that it was actually their responsibility, as the project was a business-to-business (B2B) scheme.

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Sri Mulyani said this base equity was vital for the China Development Bank (CDB), acting as lender to the project, to disburse the required loan to proceed with the construction.

The project has been at the mercy of the CDB, which at one point decided it could no longer provide the necessary funding because of the missing equity.

“When the equity is already at the limit, the bank does not dare to lend any more. Now the project cannot [acquire more loans], since the four SOEs have not deposited the base equity capital,” Sri Mulyani said.

The injection is to be done through KAI, which last month took the helm of the Indonesian side in the consortium, replacing WIKA, which was encumbered with its toll road projects.

The Rp 4.3 trillion capital injection comes alongside a Rp 2.6 trillion injection to cover cost overrun in the Greater Jakarta LRT project. In total, KAI is to receive Rp 6.9 trillion in 2021 allocated from unused 2020 budget funds.

Prior to the injection, the government had asked the SOEs to solve the matter through negotiations with the Chinese side. One of the options considered was to dilute Indonesia’s share in the joint project, which currently is 60 percent.

KAI president director Didiek Hartantyo told lawmakers on Monday that the injection was made possible through recently issued Presidential Regulation 93/2021, which allowed state involvement either in the form of a loan guarantee or state capital injection.

Such state support had been ruled out under the preceding 2015 presidential regulation.

“We have been assigned as the leading sponsor to complete the Jakarta-Bandung high-speed railway project,” Didiek noted in the same meeting.

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According to SOE Ministry presentation material from July 8, the Rp 4.3 trillion injection was not the only one, as the project was to receive another Rp 4.1 trillion due to massive cost overrun, which the ministry claimed had been caused by delays related to “overoptimistic planning”.

The project is estimated to be between $1.4 billion and $1.9 billion over budget. The government has been negotiating for China to shoulder 75 percent of the responsibility.

Finance Minister Sri Mulyani was aware of the possible other injection but emphasized that the government would be careful, arguing it would not step in unless an audit was concluded to assess the problems within the project.

“Before stepping in, we would ensure it has been audited,” Sri Mulyani said, adding that a similar step would be taken by China in response to the cost overrun.