Indonesia still allocates huge fuel and electricity subsidies next year
Govt assumes oil price at $65 next year
Wednesday, August 16 2006 - 05:08 AM WIB
President Susilo Bambang Yudhoyono said in his speech at the House of Representatives on Wednesday that the government will allocate Rp 68.6 trillion in fuel subsidy and Rp 25.8 trillion in electricity subsidy next year.
The government allocated Rp 54.3 trillion in fuel subsidy and Rp 17 trillion in electricity subsidy in the 2006 state budget. But during the ongoing negations on the revision of the state budget, the government has proposed to increase the fuel subsidy to Rp 62.4 trillion and while the House has proposed to increase electricity subsidy to Rp 32.2 trillion.
?Thus we will still spend a relatively big amount of fuel and electricity subsidies in 2007. These subsidies are expected to drastically decline in 2008,? the President said in his speech delivered on the eve of the nation?s Independence Day.
Indonesia has launched several programs to use alternative energy, such as biofuel for cars and coal and gas for power plants in order to cut subsidies for fuel and electricity, but the President said the program would take some time to show results.
The President reiterated his strong supports for the development of alternative energy, saying aside from easing subsidy pressure on state budget, the program would create millions of jobs to the population.
He said the government to create 5 million new jobs in the new investment in agricultural industries producing energy from palm oil, sugarcane and jatropha.
The government will set aside Rp 1 trillion to help farmers pay interest on loans they take to expand plantation of crops that can be used to produce bio-fuels. Villages will also be encouraged to use jatropha, locally known as ?jarak?.
He called on private sectors to boost investment in the sector. ?The government alone cannot invest in this, considering the huge cost, which is why the government is asking domestic and overseas investors to actively invest in this sector."
A number of foreign investors have voiced interest to develop biofuel in the country. Companies such as Samsung Corp., the trading arm of South Korea's largest industrial group, are preparing to invest in the sector. Samsung plans to spend $1 billion to develop bio-fuel projects in Indonesia, governmental officials have said. Sime Darby Bhd., Malaysia's second-biggest publicly traded company by sales, and Genting Bhd. have also said they are interested in investing in biodiesel projects.
In the speech, the President also said the government would set oil price assumption for next year?s budget at US$65 per barrel in the current state budget. The government also expects the country to produce one million barrels of oil per day next year.
The government initially targeted oil price assumption at $57 per barrel and the nation?s oil production at 1.1 million barrels per day in the 2006 state budget. In the negotiations on the revision of the state budget, the House and the government have agreed to set the oil price assumption at between $62 and $67 and lowered the oil output target to 1.05 million per day. (Bodega)