Indonesia mulls increasing RON 90 petrol price to RM 3 per litre

While the Malaysian government had spent nearly RM 40 billion of its budget on fuel subsidies in 2022 so far, Indonesia is projected to spend nearly double that amount following a massive spike in global oil prices.

The archipelago’s government has announced it tripled its energy subsidy budget to IDR 502 trillion (~RM 152 billion) to keep prices of subsidised petrol, diesel, and some power tariffs unchanged amid rising global energy prices.

Yet, there are plans to increase the price of subsidised fuels as the subsidy budget balloons. At a recent press conference, Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono Moegiarso, said that there might not be plans to further subsidise energy costs as it might affect the country’s budget.

One of the solutions suggested is to increase the prices of subsidised Pertalite petrol (Euro 2 RON 90) from IDR 7,650 (RM 2.31) per litre to IDR 10,000 (RM 3.03) per litre and Euro 4 Solar diesel from IDR 5,000 (RM 1.51) per litre to IDR 18,000 (RM 5.45) per litre.

Also read: Indonesia’s national oil company Pertamina raises RON 92 petrol to RM 3.67 per litre

To further exacerbate the energy situation in the country, these subsidised fuels have an annual quota and according to reports, the consumption of Pertalite as of July 2022 reached 16.8 million kilolitres (KL) even though the set quota by Pertamina, the state-run oil company is 23 million KL.

Meanwhile, subsidised diesel has a set quota of 14.91 million KL in 2022 and as of July, 9.9 million KL have been sold. In short, fuel supply is running short in the country and it’s not unusual to see long lines at gas stations.

Also read: Indonesia pushes for EVs to reduce reliance on oil imports

Despite being in limited quantity, many higher-range cars would often fuel up with Pertalite due to its cheaper price than non-subsidised fuel which leads to massive leakages in fuel subsidy spending.

Also read: Tengku Zafrul: T20 enjoying RM 2 bil more in fuel subsidies than B40

As such, Pertamina is trialling a smartphone app that only allows certain groups (i.e. those with lower income) to be eligible to use subsidised Pertalite and Solar fuels. There are also talks to only allow certain vehicles with an engine capacity of up to 1.5 litres to be allowed to use Pertalite petrol.

Also read: Indonesia's Pertamina is testing smartphone app for targeted fuel subsidies

However, the eligible models under this limit range from Low-Cost Green Car models like the Honda Brio Satya and Toyota Agya to B-segment 7-seaters like the Toyota Avanza and Mitsubishi Xpander as well as the Mercedes-Benz A200 and Mazda 2. The latter two aren’t exactly cars that are owned by the group the subsidised fuels are meant for.

Closer to home, the Malaysian government is also trialling its own targeted fuel subsidy method through e-wallets. It also revealed that the current fuel subsidies mostly benefit the wealthy more than those from the lower income group.

Also read: MoF: E-wallets under trial for targeted fuel subsidy