Govt Examining Two Options To Maintain Fuel Quota

News Focus - GOVT EXAMINING TWO OPTIONS TO MAINTAIN FUEL QUOTA By Andi Abdussalam Jakarta, Jan 16 (ANTARA) - The government is examining two options that it can take if it sees the consumption of subsidized fuels will likely exceed the 2013 state budget quota of 46 million kilolitres. It is studying whether it should restrict the use of subsidized fuel by private cars or it should raise fuel oil prices so that the quota of 46 million kilolitres, amounting to subsidies of Rp193.8 trillion, set in the state budget would not be exceeded. "The government is studying how to restrict the consumption of subsidized fuel oil by private cars. It is also considering the option of raising fuel oil prices. The government will take one of the two options if we fail to control fuel oil consumption," Minister of Energy and Mineral Resources Jero Wacik said here on Tuesday. The Ministry of Finance asked the Ministry of Energy and Mineral Resources to help control subsidized fuel oil consumption so it would not exceed the quota and further burden the state budget. For 2013, the government has set a quota of 46 million kilolitres, but national consumption is predicted to exceed the quota and reach 48 million kilolitres unless steps are taken to control consumption. Finance Minister Agus Martowardojo stated that the 2013 State Budget could increase by Rp70 trillion if consumption of subsidized fuel oils this year increased from 46 million kilolitres to 48 million kilolitres. Energy observer Pri Agung Rakhmanto earlier predicted that Indonesia`s subsidized fuel consumption in 2013 would exceed the quota of 46.01 million kilolitres due to strong demand. "With subsidized fuel consumption growing 9 percent a year, subsidized fuel consumption this year has the potential to reach 48 million kilolitres, exceeding the government�s target of 46.01 million kiloliters," he said. "Subsidized fuel consumption for this year will comprise 29.2 million kilolitres of low-octane premium gasoline, 1.7 million kilolitres of kerosene and 15.11 million kilolitres of diesel oil," Rakhmanto noted. He predicted that Indonesian crude price (ICP) would be higher than the estimated US$100 a barrel. Therefore, Rakhmanto said, the government might prefer raising the quota of subsidized fuels rather than their prices. "Under the 2013 state budget, the fuel subsidy has been set at Rp193.8 trillion, which consists of the current year�s subsidy, worth Rp190.3 trillion, and the reduced subsidy of Rp3.5 trillion from 2011. Of the total, Rp140.46 trillion will be allocated for fuel and bio-fuel subsidy, Rp26.45 trillion for LPG subsidy and Rp17.26 trillion for value added tax � on the assumption that the prices of subsidized fuels will not be increased," Rakhmanto added. According to Finance Minister Agus Martowardojo, the government will increase subsidized fuel oil prices if the Ministry of Energy and Mineral Resources fails to control fuel oil consumption. "If consumption cannot be controlled, it will serve as a sign for the Ministry of Finance to hike fuel oil prices," he said at a working meeting discussing economic outlook for 2013 on January 14. He noted that subsidized fuel oil consumption was likely to exceed the quota of 46 million kilolitres this year "and thereby increase the fiscal burden imposed by swelling subsidies and expenditure". Subsidized fuel prices could be raised to reduce subsidized fuel expenditure and in anticipation of a failure in the macro assumptions made in the 2013 state budget, such as on Indonesian Crude Price (ICP), oil lifting and local currency exchange rate. "If our recalculation indicates that the ICP has increased and the rupiah has weakened, then we will raise fuel oil prices," the finance minister explained. "We have no plans yet to increase subsidized fuel oil prices, but the government will discuss it internally. We will continue to assess it because it cannot be ascertained whether the prices will be increased in 2014 or 2015, when a new government will have been formed," he said. Meanwhile, Energy Minister Jero Wacik said the government would do its best to control subsidized fuel consumption so that it would not exceed the quota. It has been considering restricting the use of subsidized fuels by private cars or raising prices. "We will apply information technology in controlling consumption," the minister stated. However, the government has not yet decided to control fuel consumption by imposing restrictions on private vehicles. �Besides considering restriction on private cars, the government is also studying the price hike option to control consumption,� Jero said. "However, if economic growth and investment remain good, then there is no need to raise fuel oil price," he noted. In an effort to control fuel consumption, the Upstream Oil and Gas Regulator (BPH Migas), the Fiscal Policy Office (BKF) and the Budgetary Directorate General of the Ministry of Finance will discuss the various options available. "We will discuss it," Acting Director General for Oil and Gas Edy Hermantoro said. According to BPH Migas head Andy Sommeng, the restriction of fuel consumption and fuel oil price hikes will help maintain the subsidized fuel quota at 46 million kilolitres. "Otherwise, consumption could reach 48 million kilolitres," he said. Recently, Bambang Brodjonegoro, the acting head of the Finance Ministry�s Fiscal Policy Board, said if the option of raising premium gasoline and diesel prices by Rp500 a litre was taken, it would help the government save more than Rp21 trillion in subsidy spending. He added that if the government employed the option of prohibiting private cars from using subsidized fuel, the move would save the state as much as Rp50 trillion.