Subsidies for fuel and electricity soaring

The government's subsidies for fuel and electricity are projected to increase to Rp 102.5 trillion (US$=Rp 10,200) from the state budget allocation of Rp 67 trillion this year as a result of the rise in crude prices, Kompas daily reported on Wednesday.

The paper quoted Minister of Finance Sri Mulyani Indrawati as saying on Tuesday that the Indonesian Crude Price (ICP) has increased to US$61 per barrel from the initial projection in the state budget of $45 per barrel. In addition, the volume of fuel consumption is predicted to increase to 18.8 million kiloliter in the second semester of this year from 18 million kiloliters in the first semester.

As a result of the increases in the crude price and fuel consumption, subsidy for fuel is expected to increase to Rp 54.3 trillion this year from the state budget projection of Rp 24.5 trillion, while electricity subsidy will rise from Rp 42.5 trillion to Rp 48.2 trillion.

In the first semester of the year, the government spent Rp 28.9 trillion in energy subsidies, including Rp 8.5 trillion for fuel and Rp 20.4 trillion for electricity. In the second semester of the year, the energy subsidy is projected to reach Rp 73.5 trillion, including Rp 45.8 trillion for fuel and Rp 27.8 trillion for electricity.

Despite of the increase, the minister said the government had thus far no plans to increase the domestic selling price of fuel and electricity because the rising subsidies still could be offset by the unused funds in the 2008 budget. (*)