TEMPO.CO, Jakarta – I Gede Nyoma Wiratmaja, the director general for oil and gas at the Energy and Mineral Resources Ministry, said the government would gradually remove fuel subsidy. This policy is the basis of the proposed permanent subsidy for diesel fuel, locally known as Solar, at Rp1,000 per liter in the 2016 state budget—the same as this year.
“The permanent subsidy is Rp1,000 per liter because we see that the projection and consumption of the lower society that still needs subsidies,” said Wiratmaja on Thursday.
Due to that reason, the government did not propose to increase the permanent subsidy for Solar in the 2016 state budget and will slowly remove fuel subsidies.
The House’s energy commission has approved the proposed permanent subsidy for Solar, but the Indonesian Democratic Party of Struggle (PDI-P) faction noted that the subsidy could be increased to Rp1,500 if global oil prices rose.
The Great Indonesia Movement (Gerindra) Party faction also asked to increase the subsidy to Rp1,200 with the same considerations. This agreement is seen as an improvement for Energy and Mineral Resources Minister Sudirman Said.
“We are grateful because two assumptions have been agreed upon, even though Indonesian Crude Price (ICP) assumption is still in number range,” said Sudirman.
Basic assumption of ICP has been approved at US$60-80 per barrel.
President Joko Widodo's administration has removed the subsidy for Premium fuel, while Solar is subsidized at Rp1,000 liter. According to Sudirman, the House's approval is important in showing that the fuel subsidy format in the future is no longer for product prices, but a direct subsidy instead.