JAKARTA, Aug 30 (Reuters) - Indonesia will ban palm oil plantations and mining firms from using subsidised fuel from September 1, an official at the agriculture ministry said on Thursday, in a bid to reduce the strain on the country's budget.
Fuel subsidies have made Indonesia's pump prices the cheapest in Asia and about half the market rate. The state spent about $18 billion on fuel subsidies last year, which is expected to rise to about $20 billion in 2013. (Full Story)
Plans to lift subsidised fuel prices earlier this year triggered violent public protests and pressured parliament to vote against the move. The government is now targeting fuel consumption by businesses as it tries to shrink its budget deficit and free up more money for infrastructure projects.
The government has also stopped its own vehicles from using subsidised fuel.
"The policy on the prohibition of subsidised fuel use by plantation and mining companies will be from September 1," Gamal Nasir, director-general of plantation at the agriculture ministry said.
Firms that may be hurt by the government's fuel move include Wilmar International WLIL.SI, PT Sinar Mas Agro Resources & Technology SMAR.JK, PT Astra Agro Lestari AALI.JK, Aneka Tambang Tbk ANTM.JK and Freeport McMoRan Copper & Gold Inc FCX.N.
"As logistic costs represent 14 percent of total production expense, the ban will adversely impact plantation companies if they do not increase their selling prices," Jakarta-based brokerage Bahana Securities said in a report on Thursday.
Benchmark November palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange were trading at around 3,005 ringgit ($960) per tonne on Thursday, down about 5 percent so far this year. POI/
Palm oil output from Indonesia, the world's top producer, is expected this year to be between 23 million and 25 million tonnes, compared with 22.5 million in 2011. (Full Story)
India, China and Europe are the main buyers of Indonesian palm oil. Exports totalled 10.13 million tonnes during the first seven months of this year. (Full Story)
Indonesia is one of the world's top metals miners and the fast-growing sector accounts for about 12 percent of gross domestic product in the G20 economy.
It is also the biggest exporter of thermal coal and refined tin, and home to the world's second largest copper mine.
President Susilo Bambang Yudhoyono's Democrat Party has been trying to tackle the issue of costly subsidies in Indonesia -- Southeast Asia's largest economy -- though the parliament earlier this year stymied its plans to lift the price of subsidised fuel.
($1 = 3.1235 Malaysian ringgits)
