The House of Representatives of Indonesia has suggested the government to put a cap on the gap between the price of subsidized fuels and unsubsidized ones next year, which would consequently cap the fuel subsidy, local newspaper the Jakarta Post reported on Friday.
Harry Azhar Aziz, Chairman of the House's working committee on budget assumptions for the 2009 state budget, suggested on Thursday the gap ratio of fuel prices in the domestic and international markets be made constant and kept rational.
In that way, the government can also cap the fuel subsidy as every time international crude oil prices increase, the prices of subsidized fuels would rise as well.
Aziz said if the government keeps subsidizing fuels regardless of how much oil prices soar, the fuel subsidy could reach half of total state expenditures, crippling the government's ability to spend on more productive activities.
Earlier, the National Development Planning Agency (Bappenas) proposed a gradual fuel price increase, for example, by 2 percent per month or 5 percent per quarter, to bring subsidized fuel prices closer to international prices while minimizing inflation expectations.
The per-liter price of subsidized Premium gasoline is Rp 6,000 (64 U.S. cents), compared to international prices of about Rp 9,000; subsidized diesel is Rp 5,000, compared to about Rp 11,000; and subsidized kerosene is Rp 2,500, compared to about Rp 11,000.
The Indonesian government predicted fuel consumption in 2009 would reach 42.8 million kiloliters, higher than an estimated 41 million kiloliters this year with the rupiah exchange rate at Rp 9,100 per dollar. The fuel subsidy will reach Rp 155.7 trillion in 2009, higher than Rp 126.8 trillion in 2008.
Total state expenditures are set at Rp 1,152.2 trillion, the first time surpassing Rp 1,000 trillion, and the GDP of Indonesia in 2009 is set between Rp 5,254.9 trillion and Rp 5,309.6 trillion.
Bank Indonesia senior deputy governor Miranda S. Goeltom said the central bank saw the government's budget assumptions as acceptable.
Source: Xinhua
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