Plan to Ban Pump Subsidies Likely to Cost Indonesia's Drivers Plenty

Ririn Radiawati | December 03, 2010
Motorists in the capital may have to resort to Pertamina’s more expensive, higher-octane Pertamax fuel or fill their tanks at the state energy company’s competitors. (JG Photo/Safir Makki) Motorists in the capital may have to resort to Pertamina’s more expensive, higher-octane Pertamax fuel or fill their tanks at the state energy company’s competitors. (JG Photo/Safir Makki)


Jakarta. All private car owners in Jakarta who fill up on subsidized fuel may see their bill at the pump rise by nearly 50 percent as the government, hard-pressed to ease the burden of subsidies on the budget, is likely to bar access to cheap fuel as of the New Year.

“All private cars will likely have to use non-subsidized fuel starting next year,” Ibrahim Hasyim, a top official of the downstream energy regulator BPH Migas, told reporters on Thursday.

If the plan goes ahead as expected, all private cars will not be allowed to purchase state-subsidized fuel, sold at state oil and gas company Pertamina’s stations, Ibrahim said.

Motorcycles and public transportation vehicles, the latter designated by yellow license plates, will be exempted from the ban.

All government cars and those owned by state-owned enterprises will also have to use unsubsidized fuels.

The ban would first be implemented in Greater Jakarta, including the capital and the surrounding regions of Bogor, Tangerang, Depok and Bekasi.

It would be later expanded to cover the entire island of Java as well as Bali in July.

The government estimates that the move might save it a relatively paltry Rp 8 billion ($900,000) in subsidies on about 10 percent of the 38.5 million kiloliters of subsidized fuels to be sold next year.

Pertamina marketing director Djaelani Sutomo said it would also begin to build stations for its unsubsidized high-octane Pertamax fuel for areas outside of Java and Bali in 2012.

“We are trying to start building Pertamax pumps outside Java and Bali,” he said, adding it was hoped that the pumps would be available in Sumatra and Borneo in 2012 and Sulawesi in 2013.

“East Timor and Papua have very limited subsidized fuel usage. So we can do them later,” Djaelani said.

Low-octane Premium gasoline and diesel are sold at Rp 4,500 a liter under the subsidy scheme. Pertamina’s non-subsidized Pertamax and DEX diesel are sold at Rp 6,500 and Rp 7,400 per liter, respectively.

Without subsidies, fuel prices fluctuate with global oil prices. The two foreign fuel giants operating in the country, Shell and Petronas, sell at similar prices.

The government had earlier come up with several schemes to reach its aim to totally eliminate fuel subsidies by 2015, such as allowing subsidized fuels only for cars older than five years or for cars with an engine volume of less than 2,000 cubic centimeters.

The Energy Ministry, BPH Migas and Pertamina are now preparing the infrastructure and the legal framework to support the decision to downsize the subsidy scheme.

However, they still have to bring the plan up for debate at the House of Representatives next week.


Further coverage:
Editorial: Show the benefits, click here.
The impact on business, click here.