Indonesia considers removing diesel subsidies in revised 2016 budget
3/24/2016 12:00:00 AM
By Hidayat Setiaji
JAKARTA, March 24 (Reuters) -- The Indonesian government may seek parliamentary approval to remove diesel subsidies in a budget revision for 2016, which it will submit before the second half of this year, cabinet ministers said.
The administration removed gasoline subsidies at the start of 2015, but kept subsidizing diesel fuel. It reallocated the money to infrastructure expenditure which won a round of applause from analysts and investors to rating agencies.
Standard & Poor's, a ratings agency, told Reuters this week Southeast Asia's largest economy needs to cut subsidies on diesel and gas, among others, in order to win its coveted investment grade status.
S&P is the only one out of the three major rating agencies yet to give Indonesia an investment grade rating. Indonesia obtained investment grade from Fitch Ratings and Moody's in 2011 and 2012, respectively.
The subsidy for diesel fuel is at 1,000 rupiah/liter ($0.08) and the energy minister said the government could free up 15 trillion to 16 trillion rupiah if the subsidies are removed.
"Maybe we will remove it altogether, maybe partly, it will be discussed under the state budget revision," Energy Minister Sudirman Said told a news conference on Thursday.
Finance Minister Bambang Brodjonegoro said on Wednesday the government was looking to cut both spending and revenue targets in its budget revision.
The government could miss its revenue target by as much as 60 trillion rupiah because of the drop in oil prices, he said. If its tax amnesty plan does not go through, it risks missing the target by 190 trillion more, he added.
($1 = 13,250 rupiah)
(Additional reporting by Wilda Asmarini and Gayatri Suroyo; Writing by Gayatri Suroyo; Editing by Tom Hogue and Jacqueline Wong)
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