House of Representatives Agrees to Adjust Budgets for Energy

VIVA – The Budget Committee of the House of Representatives or locally known as DPR has agreed to the proposal of Minister of Finance, Sri Mulyani Indrawati to adjust subsidies and compensation for the energy sector.

Previously, the Minister of Finance, Sri Mulyani Indrawati submitted a proposal to adjust the subsidy burden and compensation for the energy sector and received approval from the House of Representatives Budget Agency.

The proposal was made to respond to the increase in commodity prices as the Government remains consistent to maintain economic recovery and protect people’s purchasing power by keeping the State Budget healthy and sustainable.

“Because there are only two choices. If [the subsidy] is not increased, the prices of fuel and electricity will rise. If fuel and electricity [prices] do not increase, the subsidy does,” Sri Mulyani said at the working meeting of the DPR Budget Committee and Ministry of Finance on Thursday, May 19, 2022 at the House of Representative Budget Committee Meeting Room in Senayan, Jakarta.

The assumption of the Indonesian Crude Price (ICP) used in the 2022 State Budget is US$63 per barrel. However, the Minister of Finance said that currently the ICP value is above US$100 per barrel, which is US$102.5 per barrel. Rising oil prices and the absence of a price adjustment policy have led to a significant increase in the burden of subsidies and compensation.

“The economic price of our fuel has seen a drastic change. The economic price is way beyond the assumed price or the price used to allocate State Budget subsidy for kerosene, diesel fuel, LPG, and Pertalite fuel,” said Sri Mulyani.

With the gap between the retail selling price of fuel and the economic price, the Government is committed to maintaining the supply and prices of fuel and LPG that are affordable to the public.

The government needs to immediately adjust the ceiling for subsidies and compensation so that business entities' finances become healthy and can maintain availability of national energy.

Likewise, the compensation will rise from Rp18.5 trillion to Rp98.5 trillion for diesel fuel, from nil to Rp114.7 trillion for subsidized gasoline fuel Pertalite, and from nil to Rp21.4 trillion for electricity.

Therefore, compared to the allocation for subsidy and compensation using the previously assumed ICP price in the State Budget, there is a discrepancy of Rp291 trillion.

On this opportunity, Sri Mulyani also said her suggest in proposal to increase social protection by Rp18.6 trillion that will be distributed in the form of Direct Cash Assistance (BLT) to 20.65 million beneficiary groups and Productive Assistance for Micro Enterprises (BPUM), so the total social protection in the 2022 State Budget is Rp431.5 trillion.

“So, if people still question what is the use of the State Budget for them, the answer is social protection, hundreds of trillions in the form of fuel and electricity subsidy. Those are things people benefit from directly.” She conveyed.