Government cuts energy subsidies by 6.3% in 2024 draft state budget

Jakarta – The government cut the energy subsidy budget in the 2024 Draft State Budget by 6.3% from IDR 357 trillion (USD 23.3 billion) in 2023 to IDR 329.9 trillion (USD 21.5 billion) in 2024. The budget is to subsidise diesel, LPG and electricity.

Minister of Finance Sri Mulyani said the energy subsidy budget allocation was set with the assumption of a world oil price of USD 80 per barrel, up slightly from this year’s projection of USD 78 per barrel. Meanwhile, the Rupiah exchange rate or exchange rate in next year’s basic macroeconomic assumptions is IDR 15,000 per US dollar.

She told the press in Jakarta on Friday, 18 August that the subsidy for diesel fuel is Rp 1,000 per litre, the LPG subsidy is a price difference subsidy of Rp 8,943 per kg, and electricity subsidies for 450 VA and 900 VA households.

The government predicts that the realisation of compensation and energy subsidies this year will not be as large as budgeted, due to lower oil prices, so this year’s subsidy budget allocation is estimated to only absorb IDR 185 trillion (USD 12.1 billion) and compensation IDR 114 trillion (USD 7.4 billion).

Meanwhile, the realisation of energy subsidy payments as of July 2023 was IDR 145.9 trillion (USD 9.5 billion). During the 2019-2023 period, the development of diesel fuel distribution volume tends to increase from 16.2 million kilo litres in 2019 to 17.6 million kilo litres in 2022.

The distribution quota for diesel fuel in the 2023 State Budget quota is 17 million kilolitres. The distribution volume of kerosene fuel is relatively stable at 0.5 million kilolitres per year. Furthermore, the distribution volume of 3 kg LPG cylinders experienced an increasing trend from the actual distribution of 6.8 million metric tonnes in 2019 to 7.8 million metric tonnes in 2022.

The quota for 3 kg LPG distribution in the 2023 State Budget is 8.0 million metric tonnes. On the other hand, the realisation of electricity subsidies during the 2019-2022 period increased by an average of 2.2 per cent, from Rp52.66 trillion (USD 3.4 billion) in 2019 to Rp56.24 trillion (USD 3.7 billion) in 2022. In the 2023 outlook, electricity subsidies are estimated to reach IDR 70.88 trillion (USD 4.6 billion). (Hartatik)

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