Govt seeks House approval to increase fuel subsidy

The government is asking for an approval from the House of Representatives to increase the 2009 state budget's allocation for subsidized fuels to 38.94 million kiloliters from 36.85 million kiloliters to cope with a possible increase in demand during the year.

The proposal to raise the volume of subsidized fuel was unveiled by Minister of Energy and Mineral Resources Purnomo Yusgiantoro during a hearing with the House?s Commission VII in Jakarta on Thursday.

During the hearing, Purnomo said that the increase in the fuel subsidy would be needed to meet a possible surge in demand as a result of the cut in fuel prices of subsidized Premium gasoline and diesel.

In addition to the lower prices, the upcoming legislative and presidential elections would also result in a higher fuel demand. Adi Subagyo, a commission member of downstream oil and gas regulator BPH Migas estimated that the elections would contribute to an increase in the demand for subsidized fuels by between 2 and 3 percent.

In its proposal, the government plans to increase the allocation for the subsidized Premium gasoline to 20.63 million kiloliters from 19.44 million kiloliters at present, and diesel to 12.50 million kiloliters from 11.60 million kiloliters.

?For kerosene, the government has no plan to increase its subsidy. The subsidized kerosene will remain at 5.80 million kiloliters,? Purnomo said.

In addition to Premium and diesel, the government also proposed an increase in biofuel subsidy to Rp 774.46 billion to ensure that the government?s program to promote the use of the biofuel would continue despite the fall in oil prices.

?The government plans to provide a subsidy of Rp 1,000 for each litter of gasoline and dieel with biofuel content,? he said. (godang)