last month, the government officially raised the price of Pertamax fuel oil (BBM). This time, the government plans to increase the price of Pertalite gasoline (RON 90) and Liquefied Petroleum Gas (LPG) 3 kilograms (kg). This decision is still awaiting the approval of President Joko Widodo.
This was stated by Deputy III for the Coordination of BUMN Business Development, Research and Innovation at the Coordinating Ministry for the Economy, Montty Giriana.
According to Montty, the decision to increase the price of Pertalite is in the hands of the President. However, what is certain is that his party is currently managing the potential for additional energy subsidies amidst the rising prices of energy commodities in the world that continue to soar.
“Essentially what we are doing now is we are doing an exercise regarding how much additional subsidies are, how much additional compensation is and we also see when the price increase is due. It must be decided during a limited meeting (ratas) with the President,” he said at CNBC Indonesia’s Energy Corner, Monday (25/4/2022).
Furthermore, currently, the Coordinating Ministry with the Ministry of Energy and Mineral Resources, the Ministry of Finance, the Ministry of SOEs, and Pertamina continues to discuss the proposed ideal price increase for Pertalite and LPG fuel products. After that, the government will only calculate the amount of social support that needs to be prepared if the basic needs of the community are adjusted.
“The Ministry of SOEs ensures that SOEs can purchase this oil. We are doing the exercise at the right time,” he said.
On the other hand, the Coordinating Ministry for the Economy noted, that subsidies and compensation for Pertalite fuel, subsidized diesel, and LPG in 2022 are estimated to swell from Rp 350 trillion to Rp 400 trillion.
The estimate for the increase in subsidies is assuming that oil prices soar to US$ 100 per barrel from the initial assumption set out in the 2022 State Budget (APBN) of US$ 63 per barrel.
Montty explained, that assuming the initial Indonesian oil price (ICP) is at the level of US$ 63 per barrel, the diesel and LPG subsidies in 2022 are estimated to be “only” around Rp 70 trillion – Rp 80 trillion. Then, the compensation for the sale of subsidized Pertalite gasoline and diesel is around Rp. 60 trillion to Rp. 70 trillion.
Thus, the total subsidy and compensation to be given by the government to PT Pertamina (Persero) for the sale of fuel and LPG in 2022 were initially estimated to be “only” around Rp. 140 trillion.
“At that time, we assumed an ICP of US$ 63 per barrel, that was an estimate of Rp. 140 trillion in subsidies and compensation. If the ICP goes up to US$ 100 per barrel, the subsidy plus compensation could be around Rp. 350 trillion to Rp. 400 trillion. this potential increase in subsidies and compensation,” Montty.
He explained that the determining factor for the spike in fuel and LPG subsidies was the price of Indonesian crude oil (ICP), which refers to the Mean of Platts Singapore (MOPS), especially for the price of fuel products.
The reason is, that the purchase or import of fuel by Pertamina refers to MOPS.
“With these fluctuations, we see the gap between the price between Pertalite and the economic price and the price of Diesel, then LPG, the economic price is getting here, getting swollen,” he continued.
In anticipation of this oil price continuing to soar, according to him, the government has also carried out a study, including a plan to increase the price of subsidized fuel and LPG for 3 kg cylinders. Even if it is necessary to increase the price of fuel and LPG, according to him, the government will also calculate the amount of social support to reduce the burden on society for the increase in the price of energy products.
According to him, this study was carried out jointly between relevant ministries/institutions such as the Ministry of Energy and Mineral Resources, the Ministry of SOEs, the Ministry of Finance, and Pertamina.
Previously, Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif said that in the short term, the government plans to adjust the Liquefied Petroleum Gas (LPG) formula for subsidizing 3 kg cylinders, apply electricity tariff adjustments for non-subsidized customers (tariff adjustment), and in the medium term, it will adjust the retail selling price of LPG as well as Pertalite and Diesel gasoline.
Furthermore, in the medium term, the government will adjust the price of Pertalite, diesel oil, and 3 kg LPG in response to the spike in world oil prices and international LPG prices.