OPENING REMARKSOF THE MINISTER OF ENERGY AND MINERAL RESOURCES

DELIVERED AT THE WORKSHOP ON FOSSIL FUEL SUBSIDY REFORM

Hotel Pullman Thamrin, Jakarta, 22-23 April 2015

- Distinguished member of the Commission VII of the House of Representatives of the Republic of Indonesia, Bapak Satya Widhya Yudha,

- Distinguished member of National Energy Council of the Republic of Indonesia,

- Director General of Budget, Ministry of Finance or his representative- Director General of Oil and Gas or his representative- Director General of Electricity- Director General of New and Renewable Energy and Energy

Conservation General of Electricity- Prof. Dr. Maizar Rahman, Senior Researcher on Energy- Distinguished Deputy Director General for Electricity Information and

Analysis, Secretariat of Energy, Mexico  Mrs. Lizeth Azucena Uribe García.

- Dato’ Dr. Nadzri bin Yahya, Deputy Secretary General (Energy) and Principal Assistant Secretary, Ministry of Energy, Green Technology and Water, Malaysia

- Mr. Adan Enrique Garcia Ramos, Director of Price Policy for Petroleum Industry, Secretariat of Finance, Mexico

- Program Manager of South East Asia, International Energy Agency, Mr. Florian Kitt

- Mrs. Masami Kojima, Lead Energy Specialist of the World Bank- Mr. Terrence G. Surles, Senior Advicer of California Institute for

Energy and Environment ; - Mr. Peter Wooders, Director Programe of Global Subsidies Initiative- Distinguished Guests,- Ladies and Gentlemen

Assalamu’alaikum Warahmatullahi Wabarakatuh,May all of us be bestowed with peace and prosperityGood morning to all of you

First and foremost I would like to thank you to all of you for joining us in

this Workshop on Fossil Fuel Subsidy Reform which is organized in

cooperation between the Secretariat General of the National Energy

Council, the Directorate General of Oil and Gas, Bandung Institute of

Technology (ITB) and the International Energy Agency.

As we all known, energy subsidies issue have been a long problem in

developing countries such as Indonesia. Currently, the Indonesian

government still subsidizes fuel oil (diesel, LPG and biofuels) and

electricity. The amount of the subsidy to be borne by the state budget in

2014 reached about 274 billion dollars, which was indeed, very

burdensome to the state budget and at the same time lowering the

government's ability to develop other sectors such as education, health

and physical infrastructure that can be benefitted directly by the people.

In order to reduce the burden of subsidies, especially fuel oil subsidies,

the Indonesian government has issued a policy to eliminate premium oil

subsidies, yet still provide a subsidy for diesel by Rp1,000 / liter. So far

the elimination of subsidies has been running well which is mainly

supported by the decline in world oil prices.

In an effort to improve national energy management, in October 2014,

the Government has issued Goverment Regulation No. 79 Year 2014 on

National Energy Policy which contains four main policy direction as

follows : (1) availability of energy (2) priority energy development (3)

utilization of national energy resources and (4) national energy reserves

and six supporting policies which consisted of : (1) Energy conservation,

energy resources conservation, and energy diversification;

(2) Environment and safety; (3) Pricing, subsidy, and energy incentives;

(4) Infrastructure and access of people to energy and energy industry;

(5) Research, development, and application of energy technology;

(6) Institutional and funding matters.

Those policy direction, established to achieve the energy mix target as

follows:

In 2025, renewable share will be 23%, gas share 22%, coal share

30%, oil share 25%.

In 2050, renewable share will be 31%, gas share 24%, coal share

25%, oil share 20%.

In particular subsidy policy described in article 21 which states that the

subsidy provided by the Government and Local Government in an effort

to implement a fair economic. In addition, the subsidy is given if the

purchasing power of the people can not be implemented and the price of

renewable energy is more expensive than the price of fossil fuels that

are not subsidized. Subsidies are also only given the right target for the

low income people. This article also explains that the reduction of fuel

and electricity subsidies done gradually until the purchasing power of the

people is achieved.

Distinguished Guests, Ladies and Gentlemen,

The electricity subsidy was phased-out through the application of the

increase in electricity basic tariff periodically, but the subsidy is given to

disadvantaged households groups. This Electricity subsidy reduction

policy relatively does not cause upheavals in society. It will be a learning

lesson for Mexico who has been successful in removing fuel subsidies

but still facing difficulty in reducing the electricity subsidy.

I hope that during the two days of discussions and based on the

experience of the two countries, Indonesia and Mexico may formulate

constructive recommendations to the governments of both countries in

the effort to achieve fair economical energy prices.

Distinguished Guests, Ladies and Gentlemen,

I am sure, this workshop will be of beneficial by the presence of some

countries in this workshop to share their experiences in implementing the

reduction of subsidies on energy prices to get the best achievements in

the field.

I wish you all fruitful deliberations and successful conference.

With these few words, I now wish to declare this ”Workshop on Fossil

Fuel Subsidy Reform” officially open.

Thank you for your kind attention and participation.

Wassalamualaikum Wr. Wb.

National Energi Council, The Republic of Indonesia

Syamsir Abduh

Coordinator

.