ICP Peg 90 Dollars Per Barrel, Minister Of Finance Sri Mulyani: Energy Subsidy In 2023 Only Rp336.7 Trillion

Screenshot of the press conference of the Financial Notes and the 2023 State Budget Bill. (Photo: VOI/Andry Winanto)

JAKARTA - In the Draft State Budget (RAPBN) 2023, the government has set the Indonesian Crude Price (ICP) at 90 US dollars per barrel. This figure is an increase compared to the 2022 state budget which is 63 US dollars per barrel.

However, Finance Minister Sri Mulyani Indrawati revealed that the value of subsidies and compensation for the energy sector in 2023 will only reach Rp336.7 trillion. This amount consists of the subsidy value of Rp. 210.7 trillion and compensation of Rp. 126 trillion.

"Next year, if fuel is assumed to be at 90 dollars per barrel, spending on subsidies will not be as big as this year," Sri Mulyani said in her presentation in Jakarta, Tuesday, August 16.

For 2022, the fuel subsidy has sucked the APBN up to IDR 502 trillion and is in danger of swelling because the Pertalite consumption figure is predicted to increase.

"Next year, oil prices are projected to be relatively lower at 90 dollars per barrel again. Our exchange rate is also expected to be relatively better than the current situation, which is more volatile," he said.

For this reason, Sri Mulyani said the subsidies in the APBN were still very thick. He also hopes that the distribution of LPG, diesel and pertalite must be controlled so as not to exceed the subsidy budget that has been set.

"From the absolute side, the subsidy is still very thick. I hope that the number and million kilo liters of Pertalite, Solar and LPG will still be controlled, otherwise it can be exceeded. Even the Rp502 trillion can be skipped if the volume of the subsidy is not controlled," he continued.

Quoted from the 2023 financial memorandum, the planned energy subsidy of Rp. 210.7 trillion consists of subsidies for certain types of fuel and 3-kg LPG cylinders of Rp. 138.3 trillion and electricity subsidies of Rp. 72.3 trillion.

The budget for certain types of fuel subsidies and 3 kg LPG is used to continue the provision of price difference subsidies for kerosene and fixed subsidies for diesel fuel accompanied by volume control and supervision of groups or sectors entitled to use them; and transformation of subsidized 3 kg LPG cylinders to make them more targeted and based on recipient targets and integrated with social protection programs.

Meanwhile, the calculation of the subsidy budget for certain types of fuel and 3 kg LPG cylinders in 2023 uses assumptions and parameters, including:

(1) the exchange rate of the rupiah against the US dollar and the ICP;

(2) a limited subsidy for diesel oil of Rp. 1,000/liter;

(3) the volume of diesel fuel is 17 million kilo liters and kerosene is 0.5 million kilo liters; and

(4) the volume of 3 kg LPG cylinders is 8 million metric tons.

As for the electricity subsidy budget, it is planned to be Rp. 72.3 trillion. This increase in allocation was mainly influenced by the increase in the Basic Cost of Supply (BPP) of electricity. Some of the reasons for the increase in BPP as referred to include:

(1) increase in the fuel mix of fuel;

(2) increasing the use of biomass fuel for cofiring PLTU; and

(3) VAT increase of 11 percent.