Indonesia has introduced a US$6/MBtu cap on gas prices for power plants, that applies retroactively from 7 April 2020 to the state-owned power utility PT Perusahan Listrik Negara (PT PLN) and to independent power producers (IPPs). The difference between market prices and fixed prices will be covered by the Indonesian state. The measure will help cut subsidies the government must pay to PT PLN, for which it set aside IDR54,800bn (US$3.8bn) in 2020. PLN’s total fuel expenditures are estimated at IDR146,670bn (US$10.3bn) in 2020, with 38% of it for natural gas.
Earlier in April 2020, the government imposed a US$6/MBtu cap on the gas price for seven energy-intensive industries, namely fertilisers, petrochemical, oleochemical, steel, ceramics, glass, and rubber gloves. The industries, which currently purchase gas from the state-owned gas utility PT Perusahaan Gas Negara (PT PGN) between US$7/MBtu and US$10/MBtu, will benefit from the measure, while those having secured lower prices will continue to pay less than US$6/MBtu. The price cap took effect retroactively on 6 April 2020. It is expected to accelerate economic growth and improve the competitiveness of national industries. A wider gas pricing policy for all industrial consumers is under consideration.
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