Committee proposes lower fuel subsidy next year
Committee proposes lower fuel subsidy next year
Leony Aurora, The Jakarta Post/Jakarta
A working group of the House of Representatives' Budget Committee
will propose an overall subsidy for oil-based fuels of Rp 54.3
trillion (US$5.35 billion) in next year's state budget, 20
percent lower than the government's proposal of Rp 68.5 trillion.
Although the calculations are based on the current domestic
retail prices for subsidized fuels as well as the market prices
for industry, they do not mean the government cannot raise prices
further next year, said committee member Tjatur Sapto Edy on
Friday.
"It's the House's job to determine the maximum subsidy to be
spent on fuel," he said. "The government can raise prices, but
they will have to face the people."
The working group will propose the subsidy to the Budget
Committee and the House will discuss the 2006 budget in a plenary
session. The House will resume the sitting on Oct. 24.
In calculating the fuel subsidy, the committee based its
calculations on Indonesian crude production of 1.05 million
barrels per day (bpd), an Indonesian Crude Price (ICP) of $57 per
barrel and an exchange rate of Rp 9,900 against the U.S. dollar.
Individual fuel subsidies would apply to 17.08 million
kiloliters (kl) of premium gasoline, 14.5 million kl of diesel
and 10 million kl of kerosene. The subsidized fuels currently
retail at Rp 4,500 per liter, Rp 4,300 per liter and Rp 2,000 per
liter, respectively.
Working group member Ramson Siagian said that as the
calculations were based on current prices, the government could
not raise prices further next year.
"That's what we have decided," he said. "The subsidy money
will be sufficient for the government to meet demand without
raising prices."
Since July, state oil and gas firm PT Pertamina, with the
government's consent, has been charging market prices to industry
to contain the ballooning cost of the fuel subsidies.
The government had previously said that it would raise fuel
prices gradually to bring them in line with market prices between
the end of 2006 and the end of 2007.
The government will spend Rp 89.2 trillion in fuel subsidies
this year, lower than the previously estimated Rp 113.7 trillion,
thanks to the increase of 126.6 percent on average in domestic
subsidized fuel prices on Oct. 1.
The fuel price hikes have already led to lower demand. Fuel
consumption stood at 126,000 kl per day on Thursday, Pertamina
spokesman Mochamad Harun said.
"We're seeing significant declines in the demand for premium
gasoline and diesel," he said.
Pertamina now supplies 33,000 kl of premium gasoline per day,
down from 52,000 kl the week before the price hikes, while diesel
consumption has fallen to 40,000 kl per day from 71,000 kl
The demand for kerosene, however, has risen to 38,000 kl from
34,000 kl previously.
"We're distributing more kerosene to meet the demand," said
Harun.
He added that due to the lower demand and as the country's
refineries were producing at maximum capacity, Pertamina has
rescheduled the shipment of six cargoes of premium gasoline from
this month to November.