Indonesia delays plan to restrict subsidised fuel sales

The Indonesian government has dismissed reports that it plans to restrict purchases of subsidised fuel starting August 17, the country’s Independence Day. Energy and Mineral Resources Minister Arifin Tasrif clarified that there will be no such limitation on the sale of subsidised fuel on that date.

Earlier, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan had announced that the government was targeting to start tightening the use of fuel subsidies on August 17, in order to reduce the amount of subsidy distribution to ineligible recipients. This move was aimed at saving the 2024 state budget, which is projected to have a deficit.

However, Minister Arifin stated that the government is still processing the revision of the relevant presidential regulation and discussing the details with the Ministry of State-owned Enterprises and the Ministry of Finance. The restriction scheme will be further regulated through a ministerial regulation that will specify the vehicle types entitled to subsidised fuel.

“It should be right on target, which vehicles or types that will get the subsidy. No, nothing is limited to August 17. This is still not the case,” Arifin said.

The government has been considering restricting purchases of subsidised fuel since 2022, as the subsidy allocation has exceeded the budget due to rising international oil prices and a weakening rupiah. However, the plan was previously delayed amid concerns about its impact on purchasing power.

Experts believe that the move, if implemented, could contribute to inflation and reduce people’s purchasing power, potentially causing economic shock. The government is also aiming to ensure that fuel sold in Jakarta meets the Euro 4 emission standard of containing no more than 50 parts per million (ppm) of sulphur, down from around 500 ppm currently.