Indonesia Advisory

The finance ministry's head of fiscal policy, Anggito Abimanyu, said Monday the government may entirely stop subsidizing fuel prices next year by adjusting subsidized prices to market prices, but up to a certain limit, The Jakarta Post reported.

"In the future, we expect (subsidized fuels) to follow (the market prices) automatically up to certain ceilings," Abimanyu, told reporters, adding the government would start subsidizing fuels if the prices surpassed these limits.

Abimanyu said if the government could cut the subsidy for premium gasoline and diesel, then it could shift its focus to subsidizing kerosene, which was more important for supporting the living costs of low-income people.

He said the government could not cut the price of subsidized diesel as the current price was far below the market price.

The government early this month announced it would cut the price of subsidized premium gasoline by Rp500 per liter to Rp5,500 starting December 1 as this now reflected the market price.

It is likely the government may further cut fuel prices next year to include kerosene and diesel fuel as well.
The House of Representatives has suggested the government cap the subsidies for fuel at a certain amount, while leaving them fluctuating based on the market prices. Such an approach, the House said, would relieve the burden of the cost of the subsidies upon the government.