Subsidised fuel consumption leaps 15pc beyond budget

FUEL-HUNGRY Indonesians are on track to punch a multi-trillion rupiah hole in the nation's finances, guzzling up to 15 per cent more subsidised fuel than had been allocated in the national budget, weakening the rupiah in the process.

The state budget had assumed 46 million kilolitres (kl) of subsidised fuel would be sold this year, but Finance Minister Agus Martowardojo has acknowledged consumption could reach as high as 53 million kl.

The government has unsuccessfully struggled to curb consumption of the product by increasing the price paid by consumers, and little change is expected ahead of national elections scheduled for next year.

"With no new policy, subsidised fuel consumption could swell to 48 million kl to 53 million kl," Agus, who is seeking the governorship of the central bank, said last Thursday.

Rudi Rubiandini, chief of SKMigas, said consumption could be capped at about 48 million kl this year if the price paid by consumers was increased to 6,000 rupiah (RM1.92) per litre, up from the current 4,500 rupiah per litre.

Last year, the country's consumed 46 million kl of subsidised fuel exceeded the initial quota of 44 million kl after the government's attempt to raise the price met with violent street protests and strong opposition from lawmakers.

This year, a weak currency and high oil price will likely swell the cost of the subsidy, pushing the budget deficit beyond 153 trillion rupiah, or 1.65 per cent of the country's gross domestic product.

This year, energy subsidies - including for fuel and electricity - are budgeted to cost 275 trillion rupiah, almost a quarter of national government spending.

"(Subsidy) may be over 300 trillion rupiah this year," Bambang Brodjonegoro, head of the fiscal policy office at the Finance Ministry, said.

The country's 12-month average crude oil price reached US$112.30 (RM349.25) per barrel in January, compared to the US$100-per-barrel expectation set in the state budget.

The rupiah traded at 9,688 against the US dollar last Thursday, down about 0.2 per cent this year amid current account deficit concerns. The government assumed an exchange rate of 9,300 against the dollar in the state budget.