Indonesia's Energy Ministry proposes raising diesel fuel subsidy next year
JAKARTA: The Energy and Mineral Resources Ministry is proposing to raise the subsidy for diesel fuel, as it seeks to narrow the gap between the market price and the one administered by the government.

The ministry has suggested raising the fixed subsidy for diesel fuel to up to Rp 3,000 (18 US cents) per liter.

Currently, the figure hovers at Rp 1,000 per liter.

This only applies to subsidized diesel fuel with a Cetane Number (CN) of 48 that state-owned oil and gas firm Pertamina sells under the Solar brand.

If agreed by the Finance Ministry, it would be included in the 2025 state budget bill, which would also result in an increase in energy subsidy spending.

“In order to get the diesel fuel subsidy [to be distributed] right on target, [we] need support to increase the roles of agencies, state-owned enterprises and regional administrations in controlling and supervising the subsidized fuel consumption,” Energy Minister Arifin Tasrif told House Commission VII overseeing energy and mineral resources on Wednesday (June 5).

Currently, the government requires Pertamina to sell Solar diesel fuel at Rp 6,800 per liter, almost half of its supposed market price of Rp 12,100 per liter.

Meanwhile, the state budget only provides a fixed subsidy of Rp 1,000 per liter, resulting in a Rp 4,300 per liter gap from the market price that Pertamina bears with its own finances.

The government then provides compensation payable to Pertamina for the price gap, but it only pays the sum months after the end of every quarter.

Increasing the fixed subsidy would lessen the financial burden faced by Pertamina, especially when the company faces external pressure.

In 2020, the government’s delayed compensation payment put Pertamina’s well-being at risk, as the company faced pressure from low crude oil prices, falling fuel demand and the weak Rupiah exchange rate amid the Covid-19 pandemic.

Niaga Riva Siahaan, president director of Pertamina’s commercial arm, Pertamina Patra Niaga, has previously requested the government review the subsidy allocation for subsidised diesel fuel, which he considered no longer in line with its economic price.

“We would like to request support to review the subsidy figures, where currently the subsidy figure in the formula is Rp 1,000,” Riva told House Commission VII in Jakarta on May 28.

The government and the House are currently deliberating the draft bill for the 2025 state budget, with the process to last until September before it becomes law.

President Joko “Jokowi” Widodo will present the bill formally to the House mid-August, which will be the final time in his 10-year reign before president-elect Prabowo Subianto takes the presidential helm in October.

However, the National Development Planning Agency (Bappenas) on Wednesday proposed slashing subsidy spending next year in order to lower the deficit for the planned 2025 state budget.

It sought to bring down the deficit to between 1.5 and 1.8 percent of GDP from the initial proposal of between 2.45 and 2.82 percent. - The Jakarta Post/ANN
Indonesia,Energy and Mineral Resources Ministry,proposal,raise subsidy,diesel
JAKARTA: The Energy and Mineral Resources Ministry is proposing to raise the subsidy for diesel fuel, as it seeks to narrow the gap between the market price and the one administered by the government.