Government to limit sales of subsidized fuels in May

Ika Krismantari, The Jakarta Post, Pekanbaru, Riau

The government will proceed with its plan to limit the sales of subsidized fuels, with some part of the savings to go to subsidizing food staples, an official said Thursday.

Directorate general of oil and gas Luluk Sumiarso told The Jakarta Post the move would go into effect May 1 after a study gauging the impact of the program could be completed.

"We are still studying the plan to find better ways we can implement the program. That also includes the monitoring system in the field," Luluk said.

Other issues, he said, related to whether the policy would be applied to every vehicle or for public transportation only.

It also remained undecided whether the plan would include vehicles with engine capacities exceeding 2,000 cc, he said.

Following the skyrocketing of global oil prices, this year's fuel subsidy spending would cost the government Rp 87 trillion (US$9.3 billion), much higher than the original forecast of Rp 55 trillion.

Downstream oil and gas regulator BPH Migas has said 250 gas stations in Java and Bali will be subjected to the limitation plan this year.

The plan would include the use of smart cards for motorists to purchase subsidized gasoline or diesel fuel, the agency said.

The government is expected to be able to limit the consumption of gasoline and diesel fuel using the card, which will limit the amount of subsidized fuel a cardholder can buy.

BPH Migas expected a similar system would be used for controlling the consumption of kerosene. Such a system could lead the government to cut the kerosene subsidy by Rp 3 trillion.

The government is still discussing the new fuel consumption quota for the limitation plan, with the regulator proposing 5 liters per day per person.

BPH Migas executive Adi Subagyo said the plan could save as much as Rp 8 trillion.

The plan is also aimed at ensuring subsidized fuel consumption at the level of 35.8 million kiloliters (kl), as stated in the 2008 state budget, amid concerns the quota will rise uncontrollably.

The government proposed in the budget revision a higher consumption quota of 39 million kl on the back of robust economic growth. A higher quota will put a heavier burden on the government's cover as a greater subsidy would be needed.

Energy officials are also optimistic the limitation system will help the government use the fuel subsidy to keep the prices of food staples lower, following a rise in prices of a number of commodities in the global market.