Indonesia Hikes Fuel Prices To Rein In Ballooning Subsidies

Highlights
Indonesia raised subsidised fuel prices by about 30% on Saturday, as the government moves to rein in ballooning subsidies despite a risk of mass protests.
The price of subsidised gasoline was raised to 10,000 rupiah ($67 U.S. cents) a litre from 7,650 rupiah, while that of subsidised diesel rose to 6,800 rupiah a litre from 5,150 rupiah, energy minister Arifin Tasrif said.
"I actually wanted domestic fuel prices to remain affordable by providing subsidies, but the budget for subsidies has tripled and will continue to increase," President Joko Widodo told a news conference.
"Now the government has to make a decision in a difficult situation. This is the government's last option," said Jokowi, as the president is known.
Southeast Asia's largest economy had already jacked up its 2022 energy subsidies to 502 trillion rupiah ($34 billion), triple the original budget, pushed by rising global prices of oil and a depreciating rupiah currency.
If prices were not raised, the budget would have ballooned to 698 trillion rupiah, said Finance Minister Sri Mulyani Indrawati.
She estimated total energy subsidies would range between 591 trillion and 649 trillion rupiah for this year following the price hike, assuming the average crude price stays between $85 and $100 a barrel the rest of the year.
High energy subsidies had restrained Indonesia's inflation, at 4.69% in August, allowing the central bank to delay raising interest rates until last month, well behind regional and global peers.
Hariyadi Sukamdani, head of the Indonesian Employers Association, said price pressure from the fuel price hike would not be too much, predicting inflation will top 6% at the end of the year.
"If prices of goods are too expensive, people won't buy. We can't raise prices too much," he said.
Businesses are using unsubsidised fuels, but the price hike will affect logistics costs, Hariyadi said.
Still, accelerating inflation could put pressure on Bank Indonesia (BI) to tighten monetary policy more quickly. The bank holds a two-day policy meeting ending on Sept. 22.
Bank Mandiri economist Faisal Rachman estimated inflation could accelerate to between 6% and 7% and BI could raise the policy rate to 4.25% this year from 3.75% now.
Faisal forecasts 5% economic growth this year despite the fuel price increase, supported by commodity exports and post-pandemic mobility, adding that the government's cash distribution could help cushion some of the impact on consumption. The economy grew 5.44% in the April-June quarter.
The government has allocated an additional 24.17 trillion rupiah for cash handouts to help the poor cope with the policy's impact, Jokowi said.
POLITICALLY SENSITIVE
Fuel prices are politically sensitive in Indonesia, and the changes will have major implications for households and small businesses, as subsidised fuel accounts for more than 80% of state-owned oil giant Pertamina's sales.
The last fuel price hike was in 2014, months after Jokowi took office, aiming to free up fiscal space. That sparked protests across the archipelago.
The opposition Labour Party has arranged a protest involving thousands of workers for Tuesday, chairman Said Iqbal, who also heads a trade union, told Reuters. He called on parliament to pressure the government to cancel the price hike.
"This will hurt purchasing power," he said. "Wages have not increased for three years and inflation is bound to rise sharply."
Small protests against any price hike, mostly led by students, had erupted in the recent days in several cities.
After the price hike announcement, Pertamina said it was committed to ensuring adequate fuel supplies nationally. Cars were seen queuing in some stations in the capital Jakarta after the announcement.
Pertamina, Asia's biggest gasoline importer, had deferred some of its gasoline deliveries for September ahead of the price hike, due to an expected drop in fuel demand, traders said.
Decades ago Indonesia was a major oil exporter, becoming a member of the Organization of Petroleum Exporting Countries in the 1960s, but its oil output declined and it turned to net oil importer in the 2000s. Indonesia is still an exporter of gas.
($1 = 14,895.0000 rupiah)
Last Updated on September 7, 2022
Great Deals on Used Cars
View All Used Cars
- 8,000 km
- Hybrid
- Automatic

- 24,110 km
- Diesel
- Automatic

- 53,763 km
- Petrol
- Manual

- 20,156 km
- Electric
- Automatic

- 64,000 km
- Petrol
- Manual

- 65,000 km
- Petrol
- Manual

- 49,000 km
- Diesel
- Automatic

- 55,000 km
- Diesel
- Automatic

- 85,000 km
- Hybrid
- Automatic

- 70,123 km
- Diesel
- Automatic
Upcoming Cars










Upcoming Bikes










Explore More
Latest News
Related Articles

37 minutes ago
The ministry aims to introduce free medical treatment for injured accident victims in the next three to four months

1 hour ago
Greaves Electric Mobility has collaborated with Kedia Organisation and is setting up its first dealership in Teku, Kathmandu

1 hour ago
With the launch slated for 2024, the Lamborghini Urus PHEV was spotted testing at the gruelling Nurburgring race track.

1 hour ago
The Urban SUV concept is the first in a line of 6 EVs, which the company says will be revealed toward the first half of 2024

2 hours ago
CFMoto revealed a new mid-size in-line triple engine at EICMA 2023 and now the specifications of the engine have been revealed.

3 hours ago
India Kawasaki is all set to revive a popular motorcycle name at the upcoming India Bike Week 2023. Hint! It is likely to be a cruiser motorcycle, that was on sale in India many years ago.

6 hours ago
The Mercedes-Maybach GLS 600 was gifted to the actor by her husband, Vignesh Shivan on her birthday

6 hours ago
Hyundai has presented the Ioniq 5 to Shah Rukh Khan to commemorate the 25-year-long association with the brand. It will be the first electric vehicle in his car collection.

7 hours ago
The recall, initiated due to concerns over the manufacturing of certain components, aims to inspect and replace the affected parts

7 months ago
The updated Honda Brio gets new features and updated design styling

8 months ago
Demand was the highest recorded in data compiled by the Indian Oil Ministry's Petroleum Planning and Analysis Cell (PPAC) going back to 1998.

10 months ago
Consumption of fuel, a proxy for oil demand, was about 4% higher than the previous month, and rose 3.1% year-on-year to 19.60 million tonnes in December

1 year ago
Indonesia raised subsidised fuel prices by about 30%, as the government moves to rein in ballooning subsidies despite a risk of mass protests.
