0 Subsidized Fuel Consumption Leaps 15% Beyond Budget

Fuel-hungry Indonesians are on track to punch a multi-trillion rupiah hole in the nation’s finances, guzzling up to 15 percent more subsidized fuel than had been allocated in the national budget, weakening the rupiah in the process. The state budget had assumed 46 million kiloliters of subsidized fuel would be sold this year, but Finance Minister Agus Martowardojo has acknowledged consumption could reach as high as 53 million kiloliters The government has unsuccessfully struggled to curb consumption of the product by increasing the price paid by consumers, and little change is expected ahead of national elections scheduled for next year. 

“With no new policy, subsidized fuel consumption could swell to 48 million kiloliters to 53 million kiloliters,” Agus, who is seeking the governorship of the central bank, said on Thursday. Rudi Rubiandini, chief of oil and gas regulator SKMigas, said consumption could be capped at about 48 million kiloliters this year if the price paid by consumers was increased to Rp 6,000 (62 cents) per liter, up from the current Rp 4,500 per liter. Last year the country’s consumed 46 million kiloliters of subsidized fuel, exceeding the initial quota of 44 million kiloliters, after the government’s attempt to raise the price met with violent street protests and strong opposition from lawmakers. 

This year, a weak currency and high oil price will likely swell the cost of the subsidy, pushing the budget deficit beyond Rp 153 trillion, or 1.65 percent of the country’s gross domestic product. This year, energy subsidies — including for fuel and electricity — are budgeted to cost Rp 275 trillion, almost a quarter of national government spending. “[The subsidy] may be over Rp 300 trillion this year,” Bambang Brodjonegoro, head of the fiscal policy office at the Finance Ministry, said on Thursday. The country’s 12-month average crude oil price reached $112.30 per barrel in January, compared to the $100-per-barrel expectation set in the state budget. 

The rupiah traded at 9,688 against the US dollar on Thursday, down about 0.2 percent this year amid current account deficit concerns. The government assumed an exchange rate of 9,300 against the dollar in the state budget. High demand for fuel in recent months has driven up fuel imports in Indonesia, which left the Organization of the Petroleum Exporting Countries in 2008 as its oil production declined due to lagging investment in new well exploration. Indonesia imported $3.8 billion worth of crude oil and fuel in January, up 31 percent from $2.9 billion in the same month a year earlier.

source : the jakarta globe