House of Representatives Approves Adjustment of Subsidy, Compensation for Energy Sector

By Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation     Date 19 Mei 2022
Category: News
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Work meeting of House of Representatives’ Budget Committee and Ministry of Finance, Thursday (05/19). (Photo by: PR of Ministry of Finance)

The Budget Committee of the House of Representatives (DPR) has approved the proposal of Minister of Finance Sri Mulyani Indrawati to adjust subsidy and compensation for energy sector.

The proposal was made to respond to the increase in commodity prices as the Government remains consistent to maintain economic recovery and protect people’s purchasing power by keeping the State Budget healthy and sustainable.

“Because there are only two choices. If [the subsidy] is not increased, the prices of fuel and electricity will rise. If fuel and electricity [prices] do not increase, the subsidy does,” Sri Mulyani said at the working meeting of the DPR Budget Committee and Ministry of Finance, Thursday (05/19) at DPR Budget Committee Meeting Room in Senayan, Jakarta.

Sri Mulyani pointed out that the assumed Indonesian crude oil price (ICP) used in the 2022 State Budget is USD63 per barrel, but the current price of ICP is USD102.5 per barrel.

The surge in oil price and the lack of policy on price adjustment led to a significant increase in subsidy and compensation, she added.

“The economic price of our fuel has seen a drastic change. The economic price is way beyond the assumed price or the price used to allocate State Budget subsidy for kerosene, diesel fuel, LPG, and Pertalite fuel,” she said.

As there is a widening gap between fuel retail price and economic price, the Government is committed to maintain supply and the affordable price of oil fuel and LPG. The Government also needs to immediately adjust subsidy and compensation ceiling to maintain the health of businesses’ finance and availability of national energy.

The subsidy and compensation for stable commodity prices in 2022 are likely to reach up to Rp443.6 trillion. Sri Mulyani also stated that if the assumed ICP price is USD100 per barrel, then the subsidy for energy will surge from Rp134 trillion to Rp208.9 trillion.

Likewise, the compensation will rise from Rp18.5 trillion to Rp98.5 trillion for diesel fuel, from nil to Rp114.7 trillion for subsidized gasoline fuel Pertalite, and from nil to Rp21.4 trillion for electricity.

Therefore, compared to the allocation for subsidy and compensation using the previous assumed ICP price in the State Budget, there is a discrepancy of Rp291 trillion.

On that occasion, Sri Mulyani also addressed her proposal to increase social protection by Rp18.6 trillion that will be distributed in the form of Direct Cash Assistance (BLT) to 20.65 million beneficiary groups and Productive Assistance for Micro Enterprises (BPUM), so the total social protection in the 2022 State Budget is Rp431.5 trillion.

“So, if people still question about what is the use of the State Budget for them, the answer is social protection, hundreds of trillions in the form of fuel and electricity subsidy. Those are the things people benefit from directly,” she remarked. (PR of Ministry of Finance/UN) (DH/MMB)

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