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Indonesia will not re-introduce gasoline subsidies: energy minister

[JAKARTA] Indonesia will not re-introduce government subsidies for gasoline even if prices bounce back to previous highs, the energy minister said on Tuesday.

President Joko Widodo scrapped gasoline subsidies at the start of the year, freeing up US$20 billion dollars in state spending for infrastructure and agricultural projects.

The removal of the subsidies - in keeping with policies announced during Widodo's campaign to win the presidency last year - hit as international oil prices were dipping to six-year lows, softening some of the pain of higher fuel prices.

The global Brent crude benchmark has climbed nearly 40 per cent from US$45.19 a barrel in January, though, prompting speculation that Indonesia might reinstate the subsidies if international oil prices keep rising.

"The president said we will never retreat from this policy," oil minister Sudirman Said said at a conference. "This is our effort to educate our people that we are no longer rich in oil and gas."

In January, the government moved the burden of fuel subsidies to Pertamina, forcing the state-owned company to accept losses to ensure retail fuel prices do not rise too fast for consumers in Southeast Asia's largest economy.

Pertamina said it lost US$72.5 million over the first two months of the year on fuel sold at prices set by the government below the company's preferred level.

The company is looking at replacing its ubiquitous RON88 "Premium" gasoline, which was subsidized by the government until this year, with a higher grade RON90 "Pertalite" grade.

The higher grade would help Pertamina pocket more revenue as RON88 is being sold at a loss.


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