Govt to issue new decree on energy savings

Adianto P. Simamora, The Jakarta Post, Jakarta | Sat, 05/03/2008 11:14 AM

 

While the existing decree on energy savings remains ineffective in easing soaring energy consumption at home, President Susilo Bambang Yudhoyono is slated later this week to issue another similar decree.

 

Vice President Jusuf Kalla told reporters Friday the decree would be stricter than its predecessor, forcing the public to limit energy use amid soaring fuel subsidies in the state budget.

 

"The regulation will, for example, task a special inspector to supervise energy saving programs in government offices. It may also demand shopping malls close an hour earlier."

 

"We will evaluate these efforts. We have not discussed raising fuel prices yet." said Kalla, adding that to some extend, the regulation would include efforts to help speed up the ongoing energy conversion program.

 

The government issued in July 2005 a presidential decree on fuel savings before raising fuel prices later in October that year.

 

After the decree was in place, government offices lowered their use of air conditioners and reduced unnecessary traveling.

 

However, the euphoria over the program only lasted for a couple of months when government offices started to turn air conditioners up to the maximum, and left lights on during daylight hours.

 

President Yudhoyono has refrained from increasing domestic fuel prices to match the international market due primarily to publicity concerns ahead of next year's presidential election.

 

Based on the oil price assumption in the revised 2008 State Budget, fuel subsidies have risen from Rp 42 trillion (US$4.56 billion) to Rp 126.82 trillion, or amounting to about 12 percent of the government's Rp 987.48 trillion total spending.

 

The new scheme is based on an estimate the Indonesian Crude Price (ICP) -- the country's benchmark oil price -- will stand at an average of US$95 a barrel for the budget year.

 

But with the ICP now hovering at more than $103 a barrel, the subsidies are likely to soar to more than Rp 140 trillion.

 

The government is exploring other options to help sustain the state budget while maintaining prices.

 

Kalla said the government had sought to garner more oil through production sharing contract (PSC) oil and gas companies.

 

"We have requested the PSCs raise oil production," he said.

 

Kalla on Tuesday gathered some 20 PSCs to his office to demand higher production.

 

However, a source attending the meeting told The Jakarta Post that despite numerous privileges enjoyed by the PSC companies, they requested more incentives and facilities.

 

"These incentives and facilities are requested in exchange for producing more oil. It sounds insensitive, really, at a time when the country is in dire need of oil," said the source.

 

Yudhoyono has received pressure from the business community to hike fuel prices to ensure fiscal sustainability.

 

Analysts fear that if fiscal sustainability is not ensured, overseas lending and foreign-direct investment would suffer.

 

Funds for infrastructure development, education and health are also likely to be strangled as subsidy spending continues to overwhelm the state budget.