Indonesia’s 2013 State Budget Act sets a quota of 46 million kiloliters of subsidized fuel for 2013, at a cost of Rp193.8 trillion (US$20.84 billion). This compares to an initial quota of 40 million kiloliters in 2012 – but which ended up increasing to over 45 million kiloliters to meet demand.

The downstream oil and gas regulator, BPH Migas, has authorized three companies to distribute subsidized fuel: PT Pertamina (the state-owned oil company), PT AKR Corporindo TBK, and PT Surya Parna Niaga. The two private companies will handle the distribution of subsidized fuel in areas outside the Java–Bali region. The involvement of private companies in distributing subsidized fuel began in 2010, in an effort to expand the supply of subsidized fuel. 

BPH Migas also plans to work with distributors to introduce several new means to track and limit subsidized fuel consumption, particularly within the transport sector, at an estimated cost of Rp100 billion (US$1.75 million). While the details remain vague, the regulator has three aims in mind: 1) to collect data on specific consumers, particularly public transportation and fishermen; 2) to establish a national command center to monitor subsidized fuel distribution nation-wide; 3) to implement a tagging technology  to distinguish subsidized fuel. 

Indonesia has experimented with technologies to control consumption for several years. As part of a pilot project in 2011, for example, the government equipped a number of small public transport vehicles with radio frequency identification (RFID) instruments. These instruments tracked subsidized fuel consumption and signaled to gas dispensers when a vehicle had reached its purchase limit.

BPH Migas apparently has not settled on a technology for monitoring and controlling consumption. “It may take the form of radio frequency identification (RFID), smart card, or barcode," said Andy Noorsaman Sommeng, Head of BPH Migas. [i]

Mixed Messages on Plans for Price Increase

The central government has recently sent mixed messages on whether it intends to raise the price of subsidized fuel in 2013. The Minister of Energy and Mineral Resources, Jero Wacik, said in December 2012 that the government did not intend to raise prices, since economic growth and investment remain strong, and the Indonesia Crude Price has not risen significantly.[ii]

However, later the same month the Deputy Minister of Energy and Mineral Resources, Rudi Rubiandini, said that he believed that subsidized fuel prices will increase in 2013.[iii] Mr. Rubiandini said an increase of Rp1,500 (US$0.16) per liter of subsidized fuel would save the government Rp60 trillion (US$6.45 billion), which could fund infrastructure, schools, and health-care.

Greater Jakarta’s Governor Endorses Reform

In a bold move, the Vice Governor of Greater Jakarta, Basuki Tjahja Purnama, encouraged the central government to cut subsidized fuel in Greater Jakarta. [iv] Mr. Purnama wants the savings allocated to developing Jakarta’s mass transportation system, and hopes that higher fuel prices will slow the build-up of private vehicles that have made the city Jakarta notorious for its traffic. [v]

The Vice Governor’s comments drew wide responses from government officials and the public.  The Minister of Industry lent his support to Mr. Purnama’s statement, adding that fuel-subsidy savings could fund much needed improvements to infrastructure.

Separately, the Minister of Energy and Mineral Resources, Jero Wacik, said he supported Mr. Purnama’s initiative, but stressed that it would need to be planned carefully. [vi] [vii]

The Deputy Minister of Energy and Mineral Resources, Rudi Rubiandini, also weighed in, adding that areas surrounding the Greater Jakarta province would need to be included; otherwise, citizens of Greater Jakarta would travel to neighboring locations to purchase cheaper fuel. He also warned that many smaller public transportation vehicles in Greater Jakarta are dependent on subsidized fuel, and would have difficulty adjusting to higher prices. [viii]

Prohibitions on Subsidized Fuel Consumption to be Extended  

The government will expand its efforts to prohibit the use of subsidized fuel in 2013.

These efforts began in June 2012, when the government prohibited government vehicles in Greater Jakarta and surrounding cities from using subsidized benzene. The prohibition was expanded to Java-Bali in August 2012; and in January 2013 the government plans to widen that prohibition to the Sumatera and Kalimantan regions. Also in 2013, government vehicles in Greater Jakarta will be prohibited from using subsidized diesel.

The government has also announced a plan to cut subsidized fuel for the sea-vessels in 2013, but with exceptions for small fishing boats and ferries that serve remote areas.

By March 2013, transport vehicles used by the plantation industry will also be forbidden from accessing subsidized fuel, according to the central government. [ix] Exceptions will be made, however, for the vehicles that are used in smaller scale plantations (run by individual in an area of less than 25 hectares) and in small-scale mining activities.

 

^{[i] http://www.tempointeractive.com/hg/ekbis/2012/12/21/brk,20121221-449684,...}

^{[ii] http://www.chinapost.com.tw/asia/indonesia/2012/12/25/365152/Fuel-hike.htm}

^{[iii] http://finance.detik.com/read/2012/12/28/155229/2128979/1034/wamen-esdm-...}

^{[iv] http://www.aktual.co/sosial/083840ahok-bantah-usulkan-pencabutan-subsidi...}

^{[v] http://finance.detik.com/read/2012/12/25/104036/2126221/1034/jakarta-hap...}

^{[vi] http://www.fajar.co.id/read-20121227162232-ide-penghapusan-bbm-subsidi-m...}

^{[vii] http://www.jpnn.com/read/2012/12/27/152006/Ide-Penghapusan-BBM-Subsidi-M...}

^{[viii] http://finance.detik.com/read/2012/12/27/145243/2127986/1034/wamen-esdm-...}

^{[ix] http://www.tempo.co/read/news/2012/12/28/090450781/Aturan-Pembatasan-BBM...}