Indonesia’s energy subsidies out of control

Indonesia’s crippling energy subsidies will surge 197% to US$31.8 billion this year from the projected US$10.7 billion.

Finance Minister Agus Martowardojo said this massive jump will require additional funding. He has asked Parliament to approve the disbursement of contingency energy subsidy reserve funds of US$1.1 billion allocated in the revised 2012 national budget.

Agus said the government needs some US$3.8 billion more to cover the energy subsidy .Of this amount, US$576 million could be taken from the state’s oil and gas income, US$82 million from non-energy subsidy savings and US$2.4 billion from last year’s allocation.

Despite huge subsidy surge, Agus said the government will be able to maintain the state budget deficit to a maximum of 2.3%.

The Finance Ministry said that additional funding for the energy subsidy would be needed because the government has estimated that demand for subsidized fuel will significantly exceed original estimates. Demand could hit 43.5 million kiloliters from the estimated 40 million kiloliters.

Because of this, the fuel subsidy could increase to US$22.6 billion from US$6.6 billion, according to the ministry.