Although fuel subsidy doubles, windfall profit remains high
Wednesday, August 30 2000 - 03:00 AM WIB
The high crude oil prices in the international market averaging over US$27.8 a barrel will double the government's fuel subsidy from Rp 22.5 trillion in the budget to Rp 43.9 trillion, according to Minister of Energy and Mineral Resources Purnomo Yusgiantoro.
Nevertheless, the soaring crude oil prices would bring a net windfall profit, minus the fuel subsidy, of Rp 11 trillion to the government.
"The windfall profit of Rp 11 trillion is a net profit because it is a net figure after being deducted with fuel imports and fuel subsidy," he said.
With the windfall profit, the government's income from oil and gas sector will rise to Rp 32 trillion from RP 20.8 trillion in the 2000 state budget.
The soaring fuel subsidy was contributed by the weakening of the rupiah against the U.S. dollar, with average crude oil price of $28 a barrel and a domestic fuel consumption of 39.9 kilo liters per day.
However, the strong dollar does bring higher income to the government's coffers, especially from crude oil exports. With average crude production of 1.54 million barrels per day, crude oil prices of $28 per barrel and the dollar's exchange rate of Rp 8,200, the government collects a gross income of Rp 75.4 trillion this year.
However, Purnomo declined to explain if the government would postpone domestic fuel price increase because of the windfall profit.
Coordinating Minister for the Economy Rizal Ramli said the government was finding ways to increase fuel prices without harming the market and the people.
Rizal said he had tasked Minister of Energy Resources Purnomo Yusgiantoro to find the formula. He gave Purnomo one week time to find the formula, which would then be discussed among economic ministers.
Purnomo used to say that he would prefer a direct subsidy, namely by giving cash money to the needy, to indirect subsidy, that is the subsidy given in the pricing of fuels like what is implemented now. He argued the indirect subsidy benefited industries and those who actually did not qualify for the subsidy, and it opens the possibility for fuel smuggling. (*)