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Who Fueling Who?

Decision to Postpone Reducing Fuel Subsidies Placing Heavy Burden on Indonesia’s State Budget

(4/6/2012) Bisnis.com reports that government subsidies for fuel will increase between Rp. 4-5 trillion (US$444 to $555 million) each month that the current heavily subsidized price supports for fuel continue in Indonesia.

Indonesia’s Finance Minister D.W. Martowardojo outlined the growing burden to the national budget, saying the planned subsidy of Rp 123.6 trillion (US$13.7 billion) in the 2012 State Budget has now ballooned to Rp. 137.38 trillion (US$15.3 billion).

The rising burden in fuel subsidies is the result of increasing use of subsidized fuel from an estimated 40 million kiloliters in the 2012 budget to 47 million kiloliters. During the first two months of 2012, Indonesia consumed 7.02 kiloliters of subsidized fuel or 18.79% of the quota estimated by the government.

The Minister also expressed fears that the heavily subsidized fuel in Indonesia with prices that are 75% less than the world average for a liter of gasoline also provide incentives for hoarding and the smuggling of fuel.
He also said that he anticipated that the current price situation and the rising price of non-subsidized Pertamax fuel would see more motorists turn to using the subsidized premium fuel.

The House of Representatives have ruled that fuel prices can only be increased if the price of Indonesia Crude Oil exceeds an average of US$120.75 per barrel for a period of 6 months.

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