Government plans to reduce kerosene consumption

The government plans to reduce the consumption of the highly subsidized kerosene beginning next year in a bid to lower the state budget deficit which is expected to further increase in the future due to the persistent increase in crude oil prices in the international market, Kompas reported on Wednesday.

The plan was discussed during a meeting between Vice President M.Jusuf Kalla and senior officials of the Ministry of Energy and Mineral Resources in Jakarta on Tuesday.

The ministry's Secretary General Luluk Soemiarso said that the Vice President had asked the ministry to establish a special team to study the possibility of reducing the highly subsidized kerosene.

"The team will be given a week to provide the details of the planned reduction of the kerosene usage," he told reporters following the meeting. Under the initial planned being discussed with Vice President, the use of kerosene would be reduced by replacing the highly subsidized fuel by liquefied petroleum gas (LPG).

The government removed the subsidy of kerosene to industrial buyers in October last year but maintained the subsidy for the sales of kerosene to households. The kerosene is sold between Rp 2,000 and Rp 2,250 per litter, almost a half of their market price which reaches above Rp 5,000 per litter.

By reducing the kerosene consumption, the government would be able to significantly reduce the subsidy which is estimated to reach Rp 54.3 trillion in the current state budget.

Pertamina's vice president Iin Arifin Takhyan said that if the planned is realized, the government could use the subsidy to expand the distribution networks for LPG in the country.

Meanwhile the chief of BP Migas, the regulatory body for upstream oil and gas industries Kardaya Warnika, said that the agency would further encourage the development of more LPG refinery plants to support the program.

This year, there will additional LPG supply of about 600,000 tons a year from PetroChina's Tanjung Jabung field in Jambi. ConocoPhilips which is currently building a LPG plant in Belanak gas field, Natuna is expected to provide another 600,000 tons a year beginning next year. (*)