Indonesia to raise volume of subsidized fuel

A hearing between the Energy Ministry and the House of Representatives committee that oversees energy affairs agreed on Thursday to set the volume quota for 2012 at 38.4 million to 41 million kiloliters. That compares with this year's quota of 38.6 million kiloliters and 36.1 million kiloliters in 2010.

"With tight supervision from local governments, I am sure that we can control the quota of subsidized fuel," Evita Legowo, director general of oil and gas at the Energy Ministry, said on Thursday.

The Indonesian government had planned to curb subsidized gasoline use in early April, a move that would have saved an estimated Rp 8 trillion ($936 million) in this year's state budget. But protests from lawmakers eventually led to the plan being scrapped.

Evita said the government would start a pilot project to monitor the amount of subsidized fuel needed by public transportation. Under the plan, the government will attach radio transmitters to mikrolets, or public minibuses, on a route linking Senen-Kampung Melayu in Central Jakarta.

Tubagus Haryono, chairman of BPH Migas, the downstream oil and gas regulator, said quotas are likely to rise further, to meet growing demand from cars and motorcycles next year.

Even in the best-case scenario, Tubagus said, the subsidized fuel quota would reach 42.19 million kiloliters next year. "Without proper controlling systems, subsidized fuel use may go up to 45 million kiloliters," he said.

The government has been setting aside money for subsidies to offset the rising price of crude oil, which would be passed on to consumers through the cost of gasoline and diesel. Oil prices have risen more than 30 percent in the past 12 months.

The government has tried to reduce subsidies in the past, but it has been difficult because of the popularity of the program.