The government is expected to discuss a plan to provide fixed fuel subsidy on Thursday, the Downstream Oil and Gas Regulatory Body (BPH Migas)`s fuel director Djoko Siswanto said here on Wednesday.
"The Finance Ministry has invited us to discuss the fixed fuel subsidy option tomorrow," he said.
According to him, the mechanism of fixing fuel subsidy currently uses the mean oil platt`s of Singapore (MOPS) plus distribution cost and margin.
This means that the subsidy provided by the government to consumers fluctuates, depending on the global oil prices, he said.
"If the subsidy is fixed, its amount will remain, for instance, at Rp1,000 or Rp2,000," he said.
Yet the fixed subsidy will have an impact on the price of fuel oils sold to the public as it will fluctuate according to the global oil prices, he said.
"It can go up and down," he said.
He said fixed subsidy can be applied for a certain period of time, for instance, two weeks or one month.
Under the present subsidy pattern, consumers buy fuel oils at the price set by the government. A change will happen when the government raises or lowers the price.
With the fixed subsidy, he said the government will just control the volume of subsidized fuels. "The subsidy will no longer be influenced by exchange rate and oil prices," he added.
Fuel subsidy is projected to reach Rp190 trillion-Rp220 trillion in 2014, with subsidized fuel volume estimated at 51.04 million- 52.41 million kiloliters, oil price at US$100-US$115 per barrel, and exchange rate at Rp9,600-Rp9,800 per dollar.(*)
Editor: Heru Purwanto
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