Investor Daily & Jakarta Globe
Indonesia’s downstream oil and gas regulator BPH Migas has forecast the volume of subsidized fuel needed to meet consumer demand will be 18 percent higher than estimated in the state budget just a few months ago.
Ibrahim Hasyim, an official at the agency, said the subsidized fuel could reach 47 million kiloliters this year if fuel consumption was not properly managed.
“Even if there is a proper control mechanism put in place, the subsidized fuel quota will reach 44.164 million [kiloliters],” Ibrahim added.
Ibrahim said that the government, the Energy and Mineral Resources Ministry and his agency have not agreed on a plan to respond to the problems. Deputy Finance Minster Anny Ratnawati told lawmakers on Thursday that the subsidized fuel quota could reach 42 million kiloliters.
The government set the subsidized quota at 40 million kiloliters in the state budget this year. Ibrahim said the subsidized gasoline will be “fully consumed” by Nov. 24 and subsidized kerosene will be fully used up by Dec. 9.
Typically during periods of unanticipated demand, the government provides more fuel to meet consumer needs while asking users to deploy fuel in an efficient manner.
Over-consumption of the subsidized fuel was evident in a Finance Ministry report presented to lawmakers last week. The document showed that total subsidized fuel bill could reach Rp 306 trillion ($32 billion) this year, 51 percent more than was allocated, rising about a fifth from last year’s Rp 255.6 trillion.
The subsidy may widen the country’s budget deficit to 2.3 percent of gross domestic product this year from its original target of 2.23 percent.
Ibrahim said that rising motorcycle and car sales were partly to blame for the rise in subsidized fuel use.
Car sales in Indonesia could reach a record of almost one million units this year. In the first half, car sales reached 534,876 units, compared to 417,672 in the first half of 2011.
In the second half of this year, car sales are expected to reach 375,000 units, lifting total car sales beyond 900,000.
Car sales are considered leading indicators of the health of the Indonesian economy. The Finance Ministry’s report predicted that the economy, which expanded by 6.5 percent in 2011, would grow by 6.3 percent to 6.5 percent this year.
Robust domestic demand, which accounts for two-thirds of gross domestic product, will remain the key driver of economic growth in the second half of the year, the document said.
Domestic demand is likely to grow as the Muslim fasting month of Ramadan, which runs from mid-July to mid-August culminating in the holiday of Idul Fitri, is typically accompanied by a surge in the consumption of durable goods and cars.