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Indonesia to tax fuel consumers in 2016: minister

[JAKARTA] Indonesia will start taxing fuel consumers in 2016 and use the funds raised to develop energy infrastructure, the government said on Wednesday, a year after it removed gasoline subsidies.

President Joko Widodo axed the subsidies shortly after taking office, winning applause from economists and rating agencies including S&P, which raised Indonesia's sovereign credit rating outlook to positive from stable in May.

The government will lower fuel prices effective Jan 5, 2016 due to falling global oil prices, Energy Minister Sudirman Said told a press briefing on Wednesday. But it will also impose a 200 rupiah tax per litre on sales of RON88 gasoline and 300 rupiah per litre on diesel starting the same day.

The levy's proceeds will go to the Energy Security Fund to be managed by the government "to develop renewable energy, build infrastructure, research, and also help connect the remote eastern part of Indonesia", Said said.

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He estimated the government would raise up to 16 trillion rupiah (S$1.65 billion) next year for the fund.

Since gasoline subsidies were removed, the government of Southeast Asia's largest economy has set retail prices of RON88 gasoline and diesel every three months.

Although prices were supposed to reflect market movements, the government had previously refused to raise them when global ones rose or the rupiah weakened, effectively shifting the subsidy burden to state energy firm Pertamina.

Pertamina told local media that it had suffered losses of 12 trillion rupiah from January until early December from sales of fuel below its preferred prices.

Pertamina and other fuel retailers in Indonesia also sell higher-grade gasoline at market prices.