Indonesia Fuel Levy to Fund Strategic Oil Reserves, Renewables

  • Government to propose levy in budget, energy minister says
  • Levy on retailers to apply for diesel, gasoline, jet fuel

Indonesia plans a levy on fuel sales to fund building a strategic oil reserve and to develop renewable power, as the OPEC member seeks to improve its energy security.

The government may levy 300 rupiah per liter ($0.02) on sales of diesel and 200 rupiah per liter for other petroleum products including gasoline and jet fuel, Sudirman Said, the Energy and Mineral Resources Minister, said in an interview on Monday. The levy will be applied to retailers including state energy company PT Pertamina, Total SA and Royal Dutch Shell Plc, he said.

“We need to have a buffer to mitigate risks when prices rise or fall drastically,” Said said at his office in Jakarta.

Indonesia, a net oil importer, reactivated its membership of the Organization of Petroleum Exporting Countries last year as it tries to improve its long-term energy security. The country does not currently have a strategic oil reserve, and the government of President Joko Widodo wants to boost its storage capacity and increase renewable power generation to reduce reliance on imported crude.

The ministry is finishing the details on the levy and plans to propose it in a revised 2016 state budget, with a special agency to be set up to manage the funds, he said. It will also consider extending the levy to coal, to allocate part of the royalty paid by coal miners to the energy fund, he said.

“Companies have margins between 5 percent to 10 percent. They can use it” to pay the levy, Said said.

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