SUBSIDY CUT NOT TO REDUCE DIESEL OIL SUPPLY

By Andi Abdussalam

Jakarta, June 11 (Antara) - The government's plan to cut its diesel oil subsidy will have no impact on the volume of diesel oil supplies which currently amount to about 16 million kiloliters.          However, Energy and Mineral Resources (ESDM) Minister Sudirman Said has not given any assurance about whether it will lead to lesser consumption of biodiesel, being intensively promoted by the government.          In the 2016 State Budget (APBN 2016), a provision of Rp1,000 per liter has been kept for diesel oil subsidy. The Draft 2016 Revised State Budget (RAPBNP 2016) will have a subsidy figure based on the cut applied.          Finance Minister Bambang Brodjonegoro said the fixed diesel oil subsidy of Rp1,000 per liter in the APBN 2016 will be reduced to Rp350 per liter in the RAPBNP 2016.          As a result of the cut, the fuel oil and liquefied petroleum gas subsidies in the APBNP 2016 will amount to Rp40.63 trillion, down from Rp63.68 trillion in the APBN 2016.          Earlier, ESDM Minister Sudirman Said informed Commission VII on energy affairs of the House of Representatives (DPR) about the government's plan to cut diesel oil subsidy by Rp650 per liter and that it will form the basis of the figure in RAPBNP 2016.      Sudirman stated the government was yet to discuss the impact of diesel oil price after the subsidy cut, but it is expected to adjust itself to the market price within a three month period.          The minister admitted that the government has made significant corrections in the APBN 2016. In the energy sector, the world oil price slide was the main factor for budget adjustment.

BI CALLS FOR FUEL PRICE HIKE TO PREVENT CAPITAL OUTFLOW

By Andi Abdussalam
Jakarta, Sept 20 (Antara) - Bank Indonesia (BI) has called on the next government to increase subsidized fuel prices before the US Federal Reserves raises its fund rate to prevent capital from flowing out of the country.          "It would be better if prices are raised in the fourth quarter. But the increase must not go beyond February 2015," BI Senior Deputy Governor Mirza Adityaswara said.          The deputy governor of BI, the central bank, said a price increase of subsidized fuels would reduce the risk of capital flight overseas, as it cuts the country's deficit.          "Indonesia is facing the risk of capital outflow by foreign investors. The government should prevent this by improving the condition of its deficit. In the short-term, this could be done by cutting fuel subsidies," said Mirza Adityaswara in Jakarta on Friday, Sept. 19.          He added that Indonesia still relies on foreign capital flow, so it should prevent capital outflow that could trigger turmoil in the financial markets.  The faster fuel prices are raised, the better it will be, he said.

JOKOWI EXPECTED TO FIND BREAKTHROUGHS FOR SUBSIDY PROBLEM

By Andi Abdussalam

Jakarta, Aug 22 (Antara) - President-elect Joko Widodo, better known as Jokowi, has said that the subsidy set by the current government  at Rp433.5 trillion in the Draft 2015 State Budget is too big and needed to be studied.          "We are still studying it. I think the amount of subsides set in the draft state budget is too big," Jokowi said during the commemoration of Indonesia's 69th independence anniversary at the State Palace last Sunday.          President Susilo Bambang Yudhoyono, who will end his tenure next October, announced on Friday last week a budget plan for 2015 amounting to Rp2,019.9 trillion, including a subsidy expenditure of Rp433.5 trillion.          The subsidy in the draft budget consists of Rp363.5 trillion for energy subsidy and Rp70 trillion for non-energy subsidy. The energy subsidy in the meantime comprises Rp291.1 trillion for fuels and Rp72.4 trillion for electricity.          Compared with this year, subsidy for fuels next year increases by Rp44.6 trillion, or from 46 million kiloliters to 48 million kiloliters.

GOVT RAISES FUEL SUBSIDY FOR 2015

By Andi Abdussalam
Jakarta, Aug 16 (Antara) - The government has projected a fuel subsidy of Rp291.1 trillion in the Draft 2015 State Budget, up from Rp246.5 trillion in the current Revised 2014 State Budget, anticipating increasing vehicle numbers and fuel consumption.          In the current revised budget, the government has set subsidized fuels at 46 million kiloliters, yet it predicts that the stocks of subsidized fuels based on the quota of 46 million kiloliters will finish by mid-December, unless consumption restriction is imposed from now.           "The 46 million kiloliters can be used up by mid-December. So, how do we meet the need for fuel for the remaining two weeks?" Minister of Energy and Mineral Resources, Jero Wacik, asked when he addressed a press conference after President Susilo Bambang Yudhoyono unveiled the government's Draft 2015 State Budget (RAPBN 2015), Friday.          The President unveiled the government's budget plan for 2015 totaling Rp2,019.9 trillion, of which Rp1,379.9 trillion was projected for the central government's spending and Rp640 trillion for  transfer to regional governments and for village funding.

GOVT NEEDS TO USE FUEL SUBSIDIES FOR INFRASTRUCTURE

By Andi Abdussalam
Jakarta, Jan 28 (Antara) - Subsidies will be more beneficial if they are used for developing infrastructure to create benefits for the public, rather than using them to subsidize fuels which would be used by people with steady incomes.          The Indonesian Chamber of Commerce and Industry (Kadin) is of the view that Indonesia has faced crucial problems with its fiscal policies because it has not utilized its huge economic resources correctly.          The government's failure in its fiscal policies has been predominantly caused by mistakes in providing a large amount of subsidies for fuels.          Kadin Chairman Suryo Bambang Sulisto said the subsidies set aside in the state budget caused a serious inefficiency which reflected weaknesses in the budget structure.          "The fuel subsidy is the largest area of spending in the state budget. It is larger than expenditures set for infrastructure, social expenditures, civil servant salaries and others," Suryo stated during a press conference at his office on Monday.          Therefore, Kadin urged the government to eliminate subsidies on fuels and direct the funds to improve infrastructure and develop new economic resources.

REMOVAL OF FUEL SUBSIDY NEEDS CAREFUL CONSIDERATION

By Andi Abdussalam

Jakarta, Dec 21 (ANTARA) - Coordinating Minister for Economic Affairs Hatta Rajasa has stated that the removal of fuel oil subsidy needs careful consideration, particularly for the sake of the nation's poor, who would have to be provided with a substitute for the fuel.          The idea to remove fuel oil subsidy, which has been a burden on the state budget, first came from the Indonesian Chamber of Commerce and Industry (Kadin) and the Jakarta deputy governor.          The Kadin has advised the government to phase out subsidies for fuel oils so the state funds could be used for development of infrastructure in various provinces across the country.          "Kadin has asked the government to remove fuel oil subsidy because it is being enjoyed not only by the poor people but also by the rich," Kadin chairman Suryo Bambang said last week.

SUBSIDIZED FUEL QUOTA MAY BE RAISED TO 44 MLN KILOLITRES

By Andi Abdussalam

Jakarta, Sept 7 (ANTARA) - The number of vehicles in Indonesia has increased by 8 percent or about 800,000, boosting yearly fuel oil consumption to about 60-66 million kilolitres, of which about 64 percent has to be subsidized.          In the 2012 revised state budget, fuel oil subsidies were set at 40 million kilolitres (worth Rp137.5 trillion). However, as of the end of August, about 29.32 million kilolitres of the subsidized fuels have been already consumed.          The government has predicted that by the end of the year subsidized fuel consumption will reach 45-46 million kilolitres, exceeding the amount set in the revised state budget.          Therefore, the government is making a proposal to the House of Representatives for an additional subsidy of 4 million kilolitres of fuel, worth Rp12 trillion. It will also launch a consumption efficiency programme to cover the shortage of 2 million kilolitres.          According to Bambang Brodjonegoro, the head of the finance ministry's fiscal policy agency (BKF), the government's plan to raise the quota of subsidized fuel oil by 4 million kilolitres will increase the fiscal burden by Rp12 trillion.          "It will be around Rp12 trillion. Every increase of 1 million kilolitres will raise the budget by Rp3 trillion," he stated here on Thursday.          "The government had predicted that the demand for subsidized fuel oils would exceed the quota and it had therefore estimated the extra fiscal burden on the state budget by taking into account the exchange rate, Indonesian Crude Price (ICP) and volume of subsidized fuel oils,¿ Bambang said.          "What is important is that the deficit will not exceed 2.3 percent even in the worst-case scenario," he added.          Earlier, Deputy Minister of Energy and Mineral Resources Rudi Rubiandini stated that subsidized fuel consumption would exceed the targeted quota of 40 million kilolitres. By the end of the first half of the year, subsidized fuel consumption reached 21.6 million kilolitres.          "If this figure is multiplied by two for the rest of the year, it would reach 43.2 million kilolitres. In addition, there is an increase in the number of motor vehicles and cars," he pointed out.         According to the latest data from state-owned oil and gas firm Pertamina, as of the end of August, the total distribution of subsidized fuel has reached 29.32 million kilolitres, including 18.44 million kilolitres of Premium gasoline, 10.06 million kilolitres of diesel oil, and 700,000 kilolitres of kerosene.          In the worst-case scenario, Rudi said, subsidized fuel consumption would reach 45 million kilolitres, forcing the government to bear an additional burden of 5 million kilolitres.          "If the prediction of 44-45 million kilolitres is correct, the burden will increase by 5 million kilolitres. This is without factoring in possible oil price hikes in the future," he added.          Therefore, the government has made a proposal to the House of Representatives for an additional subsidy of 4 million kilolitres of fuel. With the addition of 4 million kilolitres, the total quota of subsidized fuel oil will reach 44 million kilolitres.          "If the use of subsidized fuel oils at ministries and institutes is not controlled, the quota may even reach 46 million kilolitres," Rudi warned.          Therefore, the government will launch a consumption efficiency programme in its efforts to save about 2 million kilolitres of subsidized fuel in 2012.       "Without it, consumption will reach 46 million kilolitres. We can cut the predicted consumption to 44 million only with the launch of the efficiency programme," Rudi said in Hamburg earlier this month.          He noted that the government had banned government vehicles in Jakarta and its satellite towns of Bogor, Depok, Tangerang and Bekasi from using subsidized fuels since June 1, 2012, ¿Other areas in Java and Bali were also included since August 1, 2012," Rudi said.          Vehicles belonging to mining and plantation firms have also been prohibited from using subsidized diesel oil with effect from September 1, 2012.          Meanwhile, as part of the efficiency programme, the Downstream Oil and Gas Regulator BPH Migas will issue a regulation on subsidized fuel quota for cars.          "As per our plan, car owners would be allowed to buy only up to 10 litres of subsidized premium gasoline or diesel oil per day from refuelling stations," the Fuel Oil and Gas Affairs Director of BPH Migas, Djoko Siswanto, said.          The regulation is aimed at curbing the consumption of subsidized gasoline and diesel oil. Domestic sales of subsidized gasoline and diesel oils are expected to exceed the quota set in the state budget.          "The quota system will be announced soon - first in Jakarta and then in other regions. The implementation of the regulation is pressing in Jakarta, as the subsidized gasoline quota for the city is expected to be exhausted by mid-September,¿ Djoko explained.          He said BPH Migas would also ban luxurious cars from using subsidized fuels. "Car categorisation would be done on the basis of engine capacity, year of production, price," he added.          If the House of Representatives rejects the government¿s proposal for an additional subsidy of 4 million kilolitres of fuel, the government will have to implement a plan to reduce kerosene quota in order to pay for the additional gasoline and diesel fuels.          Evita Legowo, the general director of Oil and Gas at the Energy and Mineral Resources Ministry, said the conversion of quotas would be implemented to ensure a regulated supply of fuel oil for the country's citizens.         "However, the Ministry is optimistic that the parliament will agree to raise the quota, so we actually won¿t need do the conversion. We will see what the parliament members have to say on Monday," she stated.         The consumption of subsidized gasoline and diesel fuel in Indonesia is expected to surpass the designated quota, while the consumption of kerosene has been far less than the quota set in the 2012 revised state budget.        "Therefore, the kerosene-to-gasoline conversion needs to be implemented," Legowo noted.***2*** (T.A014/INE/KR-BSR/A/A014) 07-09-2012 18: