Indonesia to cut diesel subsidy by half next year

The House of Representatives of Indonesia has approved the Government’s plan to cut diesel subsidy by 50 percent to 500 RP (0.35 USD) per litre next year, on the back of expectations that crude oil prices will remain low in the aftermath of the COVID-19 pandemic.

03, Jul. 2020

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JAKARTA, VNA – The House of Representatives of Indonesia has approved the Government’s plan to cut diesel subsidy by 50 percent to 500 RP (0.35 USD) per litre next year, on the back of expectations that crude oil prices will remain low in the aftermath of the COVID-19 pandemic.

According to the Indonesian Ministry of Energy and Mineral Resources, the Indonesian Crude Price (ICP) is projected to hover between 42 USD and 45 USD per barrel in 2021, lower than the 2019 ICP average of 63 USD per barrel.

Speaking at a meeting on June 29, Minister of Energy and Mineral Resources Arifin Tasrif said the lower house also gave its nod to a plan to increase the quota for liquefied petroleum gas (LPG) while maintaining the quota for subsidised fuel in the 2021 draft state budget (RAPBN).

The Cabinet and the House are currently drafting the 2021 state budget, with President Joko Widodo scheduled to announce the finalised RAPBN during the state of the nation address in August.

Alloysius Joko Purwanto, an energy economist at the Economic Research Institute for ASEAN and East Asia (ERIA), estimated that slashing the diesel subsidy by half could save the government about 12.4 trillion RP. - VNA