Govt to cut fuel subsidy, raise electricity subsidy in 2008

The minister said Thursday that a lower subsidy would be possible due to the conversion of the use of high speed diesel (HSD) to cheaper marine fuel oil (MFO) at many of the country’s power plants, the operation of more coal-fired power plants and the conversion of heavily subsidized kerosene to liquefied petroleum gas (LPG).

Under the draft state budget for 2008 unveiled by President Bambang Susilo Yudhoyono Thursday, the fuel subsidy will drop  by Rp 15 trillion to Rp 46.7 trillion from Rp 61.8 trillion this year.

Under the proposed state budget, the government wiill also allocate about Rp 449 billion in interest subsidy on loans to be used for biofuel projects and another Rp 2.4 trillion to provide the country's low-income group of people with free gas stoves and containers to further support the program of converting the use of kerosene to LPG.

However, electricity subsidy will increase to Rp 27.84 trillion in 2008 from about Rp 25 trillion this year.

Besides the subsidy, the 2008 state budget also allocates about Rp 5.6 trillion in funds to finance projects under the supervision of the Ministry of Energy and Mineral Resources. “About 85-90 percent of the funds will be allocated for electricity projects,” Purnomo said.

About Rp 2.41 trillion of the funds will be used to build power transmission network and a part of the funds would be used to support the cash program to provide additional power supply of 10,000 megawatt. (*)