Divya Karyza, Jakarta – Policymakers will seek to offset the effects of a planned increase in the subsidized price of Pertalite motor fuel with a bump in social assistance spending, a minister has said.
Energy and Mineral Resources Minister Arifin Tasrif said on Friday that the government felt the two strategies would have to be deployed in tandem to protect consumers.
"Should [Pertalite] fuel prices need to be increased, social assistance must be disbursed first. This is one of the main [policies] that the [government] is preparing," Arifin told reporters.
He claimed the subsidized fuel price increase would be calculated in detail but did not specify when it would take place.
The country may raise fuel prices by some 30 percent to manage fiscal pressure from a ballooning subsidy budget, a lawmaker from House of Representatives Commission VII overseeing energy and mineral resources told reporters on Tuesday.
Indonesia has already tripled its 2022 energy subsidy allocation to Rp 502 trillion – approximately 16 percent of total state spending – to keep prices of subsidized fuels and some power tariffs unchanged amid rising global energy prices.
Last week, Finance Ministry officials said that amount could be insufficient due to rising fuel demand and that the state could have to budget another Rp 200 trillion in subsidies for the full year if no decision was made to raise the price of subsidized fuel.
Finance Minister Sri Mulyani Indrawati told reporters on Tuesday that the additional expenditure would swell the subsidy and compensation budget by 40 percent to Rp 700 trillion.
While the government says its fiscal consolidation remains on track, the subsidy spending would take another chunk out of the state's windfall commodity revenue.