JAKARTA – Owners of more powerful private vehicles in Indonesia will have to pay full price for fuel from Sept 1, in a move that will save the government trillions of rupiah in subsidies.
The savings from the fuel subsidy limits will go towards efforts to produce cleaner fuels by lowering the levels of sulphur, a key polluter in Jakarta, where transportation is the largest source of emissions.
“We have no plan to raise fuel prices,” Mr Rachmat Kaimuddin, a deputy minister in charge of drafting the plan, told The Straits Times on Aug 15.
“The state coffer will cover the additional costs (to make fuel less pollutive), but we will limit the purchase of subsidised fuels at pump stations only to public transport, ride-hailing and smaller-engine cars and motorcycles,” added Mr Rachmat, who is from the Coordinating Ministry for Maritime Affairs and Investment.
“We will use technology that can track daily kilometre travels as a basis to allow ride-hailing cars and motorcycles to buy subsidised fuel. If you travel 100km, for example, you may be entitled to buying 10 litres of subsidised fuel,” he added.
A large number of vehicles will have to shift to using non-subsidised fuel, and this will reduce the amount the government spends to provide for fuel subsidies, Mr Rachmat said.
There are currently no details on the engine sizes of vehicles that will be impacted by the policy.
The subsidy restrictions will begin in Jakarta, where most of the air pollution stems from the transport sector, the government said. The cuts will then be rolled out next year in other major cities and regions.
Currently, subsidised diesel is sold at pump stations at 6,800 rupiah (57 Singapore cents) per litre, while subsidised petrol costs 10,000 rupiah per litre.
At petrol stations run by state-owned Pertamina, a litre of non-subsidised diesel goes for 15,350 rupiah to 16,350 rupiah, while non-subsidised petrol costs 13,200 rupiah to 16,150 rupiah a litre.
Subsidised fuels in Indonesia are typically lower-octane and have high sulphur content, say analysts.
Sulphur stands at more than 500 parts per million (ppm) in subsidised petrol, and 2,500ppm in subsidised diesel.
This falls far short of the 50ppm mandated by the Euro 4 emission standards that all new vehicles in Indonesia must meet.
These fuels release sulphur dioxide when burned, which harms the environment and human health. The gas affects the respiratory system and may irritate the eyes. It can cause coughing and worsen conditions such as asthma.
Newer vehicles usually come with particulate filters and catalytic converters, which can almost entirely stop harmful pollutants from being released. However, these technologies are known to work better with lower-sulphur fuels, said Mr Rachmat.
Cleaning up Indonesia’s subsidised fuels will lead to overall benefits, he said.
The country intends to reduce fuel sulphur levels at its depots through catalysis. This could cost between 200 rupiah and 400 rupiah a litre, according to an official at the Energy and Mineral Resources Ministry, who spoke on condition of anonymity.
Mr Yusri Usman, executive director of Jakarta-based think-tank Centre of Energy and Resources Indonesia, hailed the government’s plan to produce cleaner fuels. But it would be more cost-efficient to get low sulphur fuel from the refinery, he noted.
Mr Yusri also criticised the subsidy cuts, saying that they are forcing motorists to choose from a very limited selection of cleaner, non-subsidised fuels.
He noted that 98-octane petrol and premium diesel are the only two non-subsidised fuels that meet Euro 4 standards; others have sulphur levels of between 200ppm and 2,500ppm.
The government has cut fuel subsidies since President Joko Widodo took office in 2014. He reversed the heavy fuel subsidies that his predecessor Susilo Bambang Yudhoyono had been pressured to keep, and allowed domestic prices to more closely align with international market rates.
Committed to carrying out reform and improving state budget prudence, Mr Widodo took on bold fuel price hikes in 2014 and 2022, which were met with massive public discontentment and violent street protests on both occasions.
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Publish date : 2024-08-16 04:02:00
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