After a successful pilot, Indonesia plans to give a free LPG stove and a cylinder to wean users off subsidised kerosene.
One of the first things Susilo Bambang Yudhoyono, or SBY as he is popularly called, promised to do on becoming president of Indonesia in October 2004 was to clean up the national budget and rid it of subsidies. Of course, every government makes such promises at the time it assumes power, but four-and-a-half-years later, comfortably poised to win a second presidential term in July, SBY has proven he’s also able to deliver.
He began attacking subsidies where they’ve been the most difficult to control — those on kerosene, the poor people’s fuel, that cost the exchequer over $4 billion a year. People didn’t like it in the beginning. There were outbursts of anger and demonstrations. But SBY stood his ground, and, by the time Indonesia’s, and supposedly the world’s, biggest LPG filling station opened in Jakarta last month, with 120 filling machines and a 1,000-metric-tonnes daily capacity, the Indonesian capital was entirely rid of subsidised kerosene. All kerosene outlets in the city have now been converted to LPG, which is friendlier to the family budget, and all popular opposition in favour of kerosene has evaporated. One can, of course, buy non-subsidised kerosene at gas stations run by Pertamina, the Indonesian oil company.
With Jakarta serving as a model, SBY is now extending his kerosene-to-LPG battle, launched two years ago, across the country. Packages comprising a 3-kg LPG cylinder and an LPG stove are being distributed free to poor households to wean them away from kerosene. About 19 million free packages have already been given out and some $462 million in fuel subsidies was saved till the end of last year. Pertamina, the sole executor of the programme, believes its target of distributing a total of 42 million packages could be reached before the end of this year.
To support the battle, the government is also making LPG supplies available throughout the country. Shortfalls will be met through imports. At the same time, Pertamina has been asked to build at least one 1,000-metric-tonnes-a-day LPG filling station each in west, central, and east Java, and 500-metric-tonnes-a-day stations in Sulawesi and Sumatra. These are in addition to the 97 LPG filling stations already established nationwide, including 10 in the Greater Jakarta area.
Winning this battle is important for SBY as he works to turn things around for Indonesia. A retired military general and a relatively young 60, who sings, writes poems, and is known among the people as the ‘thinking general’, he wants to break free from the old era of Indonesian politics. The just completed national elections give him that chance — analysts say his Democratic Party will get a much bigger popular mandate this time than in the past, when the final tally is out — and he intends to use it to the fullest not only to reform his government’s finances but also to remove the sloth that has crippled the Indonesian economy for long. Besides, moving from kerosene to LPG is a key element of Indonesia’s new energy policy.
The National Energy Management Blueprint (2005-2025) seeks to change the current domestic energy mix, which is 51 per cent oil-based, 29 per cent LNG-dependent, 15 per cent coal-supported, and 5 per cent hydro- and geothermal-derived. The objective is to change the mix to 33 per cent coal (though environmentalists say it’s not a good idea, since there’s no such thing as clean coal), 30 per cent natural gas, 20 per cent oil, and 17 per cent renewable resources (including nuclear energy). Accordingly, the government has planned to build more clean-coal and natural-gas power plants while converting oil-powered stations to gas.
In May last year, a new presidential instruction was issued to enforce a higher level of energy and water efficiency. It was under this instruction that Jakarta was chosen as a national model in respect of both non-oil power supply and LPG-based fuel use. Having tasted success in Jakarta, in the teeth of some initial opposition, SBY is determined to make his programme work elsewhere too, and use the kerosene thus saved for other profitable purposes, such as jet fuel.
At the same time, the government is pushing bio-fuels — bio-ethanol, bio-oil, and bio-diesel — as important energy substitutes. Special bio-fuel zones have been identified throughout the archipelago, with farms varying in sizes from 10,000 hectares to 100,000 hectares, and foreigners can have full control of their projects for the first 15 years. After this, 5 per cent of the ownership has to be transferred to locals.
According to mandates issued for bio-fuel use, the transportation sector has to increase its use of bio-diesel from just 1 per cent in 2008 to at least 20 per cent by 2025. Similarly, the industry and commercial sectors must boost their bio-ethanol intake from 3 per cent last year to 15 per cent by 2025. Bio-oil, seen as a substitute for kerosene and fuel oil, isn’t yet being used commercially and its use for power generation is likely to begin next year.