Indonesia to restrict the use of subsidized fuel

JAKARTA, Indonesia – Indonesia plans to restrict the use of subsidized fuel in a bid to shield the state from surging costs after the government failed to pass a price hike through parliament in March.

The plan, announced late Tuesday, May 29, by President Susilo Bambang Yudhoyono, bars vehicles owned by the government, mining and plantation firms from using cheap petrol and comes amid claims subsidies are poorly targeted, benefitting the rich more than the poor.

“The budget for fuel and electricity subsidies is very large and is increasing year to year,” Yudhoyono said, adding such expenditure could force Indonesia beyond the 3% budget deficit capped by law.

“We do not want our debt to increase and ultimately burden our grandchildren.”

The proposal will see petrol stations keep electronic records of vehicles and their fuel consumption to assess who is benefitting from the subsidies, Yudhoyono said.

Drivers of ineligible vehicles will be told to show a sticker at the petrol pump, Yudhoyono said, but did not explain how the measure would be enforced.

The government also plans to phase in by 2013 the use of compressed natural gas for public transportation to reduce the nation’s dependency on oil.

In June, all government and state enterprise buildings will begin an energy and water saving program.

Parliament in April approved energy-subsidy expenditure of 225 trillion rupiah ($23.8 billion) for this year, accounting for 16 percent of the budget, most of which goes to fuel subsidies to counter high global prices.

That came after lawmakers in March turned down a law raising the price of fuel from 4,500 rupiah (47 US cents) to 6,000 a litre as the second-largest party in the coalition government withdrew its support amid mass protests as Indonesians grow concerned about inflation. – Agence France-Presse