Committee proposes lower fuel subsidy next year<\/p>\n
Leony Aurora, The Jakarta Post\/Jakarta<\/p>\n
A working group of the House of Representatives' Budget Committee
\nwill propose an overall subsidy for oil-based fuels of Rp 54.3
\ntrillion (US$5.35 billion) in next year's state budget, 20
\npercent lower than the government's proposal of Rp 68.5 trillion.<\/p>\n
Although the calculations are based on the current domestic
\nretail prices for subsidized fuels as well as the market prices
\nfor industry, they do not mean the government cannot raise prices
\nfurther next year, said committee member Tjatur Sapto Edy on
\nFriday.<\/p>\n
\"It's the House's job to determine the maximum subsidy to be
\nspent on fuel,\" he said. \"The government can raise prices, but
\nthey will have to face the people.\"<\/p>\n
The working group will propose the subsidy to the Budget
\nCommittee and the House will discuss the 2006 budget in a plenary
\nsession. The House will resume the sitting on Oct. 24.<\/p>\n
In calculating the fuel subsidy, the committee based its
\ncalculations on Indonesian crude production of 1.05 million
\nbarrels per day (bpd), an Indonesian Crude Price (ICP) of $57 per
\nbarrel and an exchange rate of Rp 9,900 against the U.S. dollar.<\/p>\n
Individual fuel subsidies would apply to 17.08 million
\nkiloliters (kl) of premium gasoline, 14.5 million kl of diesel
\nand 10 million kl of kerosene. The subsidized fuels currently
\nretail at Rp 4,500 per liter, Rp 4,300 per liter and Rp 2,000 per
\nliter, respectively.<\/p>\n
Working group member Ramson Siagian said that as the
\ncalculations were based on current prices, the government could
\nnot raise prices further next year.<\/p>\n
\"That's what we have decided,\" he said. \"The subsidy money
\nwill be sufficient for the government to meet demand without
\nraising prices.\"<\/p>\n
Since July, state oil and gas firm PT Pertamina, with the
\ngovernment's consent, has been charging market prices to industry
\nto contain the ballooning cost of the fuel subsidies.<\/p>\n
The government had previously said that it would raise fuel
\nprices gradually to bring them in line with market prices between
\nthe end of 2006 and the end of 2007.<\/p>\n
The government will spend Rp 89.2 trillion in fuel subsidies
\nthis year, lower than the previously estimated Rp 113.7 trillion,
\nthanks to the increase of 126.6 percent on average in domestic
\nsubsidized fuel prices on Oct. 1.<\/p>\n
The fuel price hikes have already led to lower demand. Fuel
\nconsumption stood at 126,000 kl per day on Thursday, Pertamina
\nspokesman Mochamad Harun said.<\/p>\n
\"We're seeing significant declines in the demand for premium
\ngasoline and diesel,\" he said.<\/p>\n
Pertamina now supplies 33,000 kl of premium gasoline per day,
\ndown from 52,000 kl the week before the price hikes, while diesel
\nconsumption has fallen to 40,000 kl per day from 71,000 kl<\/p>\n
The demand for kerosene, however, has risen to 38,000 kl from
\n34,000 kl previously.<\/p>\n
\"We're distributing more kerosene to meet the demand,\" said
\nHarun.<\/p>\n
He added that due to the lower demand and as the country's
\nrefineries were producing at maximum capacity, Pertamina has
\nrescheduled the shipment of six cargoes of premium gasoline from
\nthis month to November.<\/p>",
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