Indonesia to cut subsidised fuel sales to limit pollution, official says

JAKARTA (Reuters) - Indonesia plans to upgrade the quality of subsidised and polluting fuels, while also selling them to fewer vehicles, in a bid to improve the air quality in the capital Jakarta and other big cities, a senior government official said.

Southeast Asia's biggest economy currently implements a blanket subsidy for the widely used 90-octane gasoline and some biodiesel, which have high sulphur content that contributes to the persistent air pollution in major cities.

The government will order state energy firm Pertamina to lower the sulphur content of these fuels and limit their sales, said Rachmat Kaimuddin, deputy coordinating minister overseeing transportation sector.

Some of the fuel subsidies will then be reallocated to Pertamina to help it fund the cost of producing cleaner fuels, he told reporters late on Thursday.

The company will ban sales of these fuels to certain cars, he added, without giving details. Pertamina has said it would provide a QR code for each buyer to track fuel purchases. Earlier this month, 4 million vehicles have been assigned a QR code, the company said.

"The distribution of subsidised fuels must be targeted," Rachmat said, adding that the government would not increase prices of these fuels, and that motorbikes, public transportation vehicles, taxis and cars used for ride sharing will still be eligible to buy them.

The government's proposal for the 2025 budget has included a plan for energy subsidy reform. The proposal is currently being discussed in parliament and an approval is expected later in September.

Indonesia has allocated 335 trillion rupiah ($21.75 billion) for energy subsidies, including for electricity and some cooking gas, for 2024 and 394.3 trillion rupiah in the 2025 budget, Finance Ministry data showed.

($1 = 15,400.0000 rupiah)

(Reporting by Fransiska Nangoy; Additional reporting by Stefanno Sulaiman; editing by Miral Fahmy)