Indonesia's Minister Luhut Signals Restrictions on Subsidized Fuel

TEMPO.CO, Jakarta - Indonesian Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said the government is considering efforts to tackle budget waste, including measures to improve efficiency in the use of subsidized fuel.

“We're aiming for a start date of August 17 to reduce the number of ineligible recipients of [fuel] subsidies,” Luhut said in a video message uploaded to his official Instagram account @luhut.pandjaitan on July 9.

He emphasized the need to curb budget waste in a bid to maintain a stable and balanced state budget. Moreover, he added that the projected state budget deficit for 2024 is expected to exceed targets. This shortfall is partly attributed to lower-than-expected corporate income taxes from commodity companies as prices fall.

While details on the planned fuel subsidy cap remain unclear, Luhut confirmed that state-owned oil and gas giant, Pertamina, is developing the scheme. 

Attempts by Tempo to reach Pertamina Patra Niaga's Corporate Communication Manager, Heppy Wulansari, for confirmation, were unsuccessful at the time of publication.

Previously, Finance Minister Sri Mulyani Indrawati predicted a rise in energy subsidies and compensation this year. This increase is attributed to fluctuations in the Indonesian Crude Price (ICP), the rupiah exchange rate, and higher volumes of subsidized LPG and electricity. This projection was presented during a meeting with the Budget Agency on July 8.

As of the first half of 2024, Sri outlined that energy subsidies and compensation reached Rp155.7 trillion, a 3.8% decrease compared to the same period in 2023 at Rp161.9 trillion. However, this figure excluded compensation and potential adjustments based on the full year's subsidy and compensation realization.

Fuel subsidy and compensation realization for the first half of 2024 reached about 7.164 million kiloliters (KL), compared to 7.167 million KL in the same period of 2023. This represents a slight 0.05% increase.

RIRI RAHAYU | ANNISA FEBIOLA

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