Indonesia Preparing Options to Limit Subsidized Fuels

The Indonesian government is preparing two options to limit the use of subsidized fuel to help ease the burden on the state budget, the regulator said.

The government is planning to start limiting subsidized fuel consumption from Jan. 1 in the capital Jakarta and surrounding cities, Ibrahim Hasyim, a committee member of petroleum regulator BPHilir Migas, said today.

The curb on subsidized fuel consumption may help Southeast Asia’s biggest economy cut subsidy spending in the state budget by 8.9 percent to 184.8 trillion rupiah ($20.5 billion) next year, Indonesian President Susilo Bambang Yudhoyono said in August.

The options are only motorcycle, public transportation and fishermen will be allowed to use subsidized fuel, or vehicles manufactured before 2005, Hasyim said at a briefing in Jakarta.

“The program will be expanded to other cities in Java and Bali from July 2011,” Hasyim said. Indonesia’s part of Borneo island, Sumatra and Sulawesi will start the curbs from 2014, he added.

The program will help the government to cut subsidized fuel quotas in 2011 budget by 40 percent to 22.16 million kiloliters, said Karen Agustiawan, president director of state-owned oil company PT Pertamina.

The first option of limiting subsidies to motorcycles, public transport and fishermen “is the most ready to be applied,” Agustiawan told lawmakers at a parliament hearing today. It will reduce the use of subsidized RON 88 gasoline by 11 million kiloliters and diesel by 3.6 million kiloliters, she said.

To contact the reporters on this story: Novrida Manurung at nmanurung@bloomberg.net; To contact the reporters on this story: Bambang Djanuarto in Jakarta at bdjanuarto@bloomberg.net

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