JAKARTA (Rambu Energy) – Indonesia Downstream Oil and Gas Regulator BPH Migas said it is proposing a fixed subsidy of Rp1,500 – Rp2,000 per litter for next year, when the government change and implement a new subsidy scheme.
The government is currently discussing to change the subsidy mechanism to a fixed subsidy system. As a result of this new mechanism, the subsidized fuel price could move up and down in line with the global oil price, however, the subsidy is fixed or unchanged.
The Head of BPH Migas Andy Noorsaman Sommeng said the government is still studying the new scheme.
Under the current system, subsidy is applied based on the set volume of fuel. As a result, the amount of subsidy could balloon if the subsidized fuel consumption is higher than the set quota.
Analysts have expected that the plunge of oil price could pave the way for the government to implement the fixed subsidy system as early as possible, between January and February. Lower oil price may also create an opportunity for the government to completely remove the subsidy.
The previous government has spent more than Rp300 trillion per annum for fuel and electricity subsidy. The Joko Widodo government has reiterated of scrapping the subsidy and channel the funds to a more productive purposes, such as developing infrastructures and public facilities. (*)