President Joko Widodo has come out to quash reports that the government was set to raise fuel prices today, which caused some panic buying across the country over the past few days.
Speaking to the press during his visit to Papua today, Jokowi said there was never a plan to remove or reduce subsidies on the hugely popular 90-octane fuel Pertalite and the diesel fuel Solar on Sept. 1, despite widespread reports.
“In regards to fuel, everything is still being calculated. It’s still being calculated with care,” Jokowi said.
The final decision on the matter seems to rest on Jokowi, with reports that not even his cabinet ministers know which way the president is leaning towards.
Jokowi previously stated that raising fuel prices, despite being seemingly necessary amid the global energy tumult, could lead to unchecked inflation and hamper economic growth. The president has never announced a specific date for which he would come to his decision.
Even so, local media outlets have widely reported on rumors that the price hike would come on Sept. 1. In recent days, long lines have been forming at gas stations throughout the country with people eager to fill up their tanks while prices are low.
Amid huge demand for subsidized fuel, the Indonesian government has earmarked IDR502 trillion (US$33.7 billion) for energy subsidies, up from the IDR170 trillion (US$11.4 billion) initially set in this year’s state budget.
One likely explanation for the ballooning demand is that fuel subsidies have continued to go towards those who aren’t actually entitled to receive them. The subsidy for Pertalite, for example, ostensibly targets low cost vehicles and motorcycles, but the fuel has also been popular for higher-end vehicles. Pertalite currently costs IDR7,650 (US$0.51) per liter, but Jokowi previously said that its actual cost is IDR17,100 (US$1.15) per liter.
The government is also considering alternative measures, such as strictly regulating what types of vehicles may receive subsidized fuel.