Indonesia Should Delay Fuel-Subsidy Limits, Rajasa Says

Indonesia should delay a plan to limit the sale of subsidized fuel because of current high oil prices, Coordinating Minister for the Economy Hatta Rajasa said.

The government will discuss a possible delay with parliament before making any decision, Rajasa said. Indonesia initially planned to gradually curb sales of subsidized fuel starting from April 1, he added.
“We have to be realistic and find the best solution for our economy and the people,” Rajasa told reporters in Jakarta today. The Energy Ministry “is conducting a comprehensive study including the impact to the economy and inflation.”

The plan to curb subsidized fuel consumption may help Southeast Asia’s biggest economy cut that portion of the state budget by 8.9 percent to 184.8 trillion rupiah ($20.5 billion) this year, President Susilo Bambang Yudhoyono said in August.

Oil surged to the highest in almost 30 months in London as Libya’s violent uprising cut supplies from Africa’s third- biggest producer. Futures for April in New York gained for a sixth day, after rising to $100 a barrel yesterday, amid estimates the revolt has resulted in the loss of as much as two- thirds of Libya’s oil output.

The government had planned to ban owners of private cars from buying subsidized gasoline and diesel in Jakarta and surrounding areas from April, Evita Legowo, director general of oil and gas at the Energy Ministry said in December. The prohibition would be in effect throughout Indonesia in 2013.
The program would help the government to cut subsidized fuel quotas in the 2011 budget by 40 percent to 22.16 million kiloliters, Karen Agustiawan, president director of the Indonesia’s state oil company PT Pertamina, said Dec. 2.

Preparations

The energy ministry has been preparing for limiting the sales of subsidized fuel since January, Legowo said in a telephone interview today.

“Our preparation is almost complete and we believe we are ready to implement it in April,” Legowo said. The ministry introduced yesterday “a barcode sticker on 409 units of public transportation, which will allow them to buy subsidized fuel.”

About 85 percent of Pertamina’s 790 fuel stations in Jakarta areas are ready to sell only Pertamax and Pertamax Plus to private cars, Legowo said, referring to the brands for RON 92 and RON 95 gasoline.
The Indonesian government allows only Pertamina and PT AKR Corporindo to sell subsidized diesel and RON 88 gasoline in the country. Royal Dutch Shell Plc, Petroliam Nasional Bhd and Total SA are allowed to sell non-subsidized diesel as well as RON 92 and RON 95 gasoline.

“No Price Increase”

Pertamina sells subsidized gasoline at 4,500 rupiah (51 U.S. cents) a liter, compared with non-subsidized gasoline of between 7,950 rupiah to 10,300 rupiah this month, according to statement on its website.
The rally in crude price is temporary and the government has no plan to raise the price of subsidized fuel, Rajasa said responding to questions from reporters.

The price of oil is entering a “dangerous zone” that threatens global economic growth and increases inflationary pressure in oil importing countries including Indonesia, according to Fatih Birol, chief economist at the International Energy Agency.

“The high price is definitely not good news for anybody,” Birol said Feb. 22. “We may see higher prices if the turmoil in key countries in the Middle East and North Africa continues.”
Indonesia, Southeast Asia’s biggest crude producer, pulled out of the Organization of Petroleum Exporting Countries in 2008 as aging fields and declining output turned the nation into a net importer.
Consumer prices accelerated to a 21-month high to 7.02 percent last month from a year earlier, after a 6.96 percent gain in December, Indonesia’s Central Bureau of Statistics said Feb. 1.