Fossil Fuel Support - IDN
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INDONESIA: GENERAL METADATA

DATA DOCUMENTATION

GENERAL NOTES

Until 2010, the Indonesian fiscal year ran from 1 April till 31 March of the following year. Following OECD conventions, for the years prior to 2011, data are allocated to the starting calendar year so that data covering the period April 2005 to March 2006 are allocated to 2005. After 2010, the Indonesian fiscal year coincides with the calendar year.

Most of the data were obtained from publications by the Global Subsidies Initiative, the Indonesian Ministry of Finance, the Ministry of Energy and Mineral Resources (MEMR), and SKK Migas (the energy regulator).

METHODOLOGICAL NOTE

A large part of support to fossil fuels in non-OECD countries (and in a few member countries such as Mexico) takes the form of price controls or regulations benefitting final consumers. In many cases, this occurs through the government mandating state-owned oil and gas companies to charge lower retail prices, thereby lowering the revenues these companies collect through sales of fuel. This often results in the government subsequently intervening to compensate state-owned oil and gas companies for the losses they incurred in the downstream sector due to the regulated prices, with this compensation taking many forms. Some governments choose, for example, to compensate national oil and gas companies through targeted tax concessions (e.g., VAT exemptions) or equity injections.

This inventory focusses on the direct budgetary transfers and tax expenditures that encourage the production or consumption of fossil fuels, including those benefitting national oil and gas companies. For this reason, some of the measures classified here under "Producer Support Estimate" may have been introduced by governments with a view to compensating domestic, vertically integrated oil and gas companies for the lower prices they are required to charge at the retail level, resulting in these measures being connected to some extent to consumer support.

Estimates of the support directly conferred to final consumers by regulated prices are available from the International Energy Agency (IEA), which estimates these induced transfers as part of its annual "World Energy Outlook" publication. Readers are therefore advised not to add together the OECD and IEA estimates given the significant risk of overlap and double-counting this involves.

PRODUCER SUPPORT ESTIMATE

Since 1966, International Oil Companies (IOCs) seeking to explore and develop oil or natural-gas resources in Indonesia have to enter into Production Sharing Contracts (PSCs) with the MEMR. The terms and conditions of the PSC system have varied with each "generation" of PSCs that has been issued since. The first generation applied from 1965 to 1975, the second generation from 1976 to 1987, and the third from 1988 until now. The main characteristics of the PSC system have, however, remained the same, namely that the government and IOCs share the production of the oil and natural gas rather than the resulting profits, and that the effective income for each side amounts to a share of the "First Tranche Petroleum" and an equity share of the profit oil after cost recovery. Since 2001, Pertamina is required to enter into a Work Agreement (WA) with SKK Migas (previously BP Migas, the energy regulator) for each of its operations, the terms and conditions for which are more or less the same than that for the PSCs. PSCs currently in force in Indonesia usually provide for the state to receive 70% of the produced natural gas, with contractors being allocated the remaining 30%. In the case of coal-bed methane (CBM), however, PSCs signed since 2007 have often featured a lower government share (45%).

Historically, the applicable income tax for companies operating in the upstream oil and natural-gas sector has been the prevailing income tax at the time that the PSC got signed, i.e. 25% as of 2013. The income tax applicable to the downstream sector normally also follows the prevailing tax law. However, as other industries in "high priority economic sectors", a number of downstream businesses can benefit from a number of income-tax concessions subject to approval by the Ministry of Finance. These businesses include: oil and natural-gas refineries, LNG and LPG producers, lubricant manufacturers, and the organic chemical industry using oil and natural gas as inputs. The list of income-tax concessions eligible taxpayers can receive includes additional net-income deductions (up to 30% of the amount invested), accelerated depreciation, the extension to ten years of the period for carrying losses forward, and a cap on withholding tax.

FOOTNOTES:

[1] Instead of a royalty, the Indonesian government charges a so-called "First Tranche Petroleum". This requires that the first 20% of production be shared in favour of the government and before cost recovery according to the equity split set in the contract (Johnston, 1994). In more recent PSCs, the government has taken the entire FTP, although in this case the FTP has usually been lowered to 10% of the first production.


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Source: OECD, FFS database, 2015

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Click to expand Date last updated
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Sep-15

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Fiscal Year starts on 1 July

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Rupiah
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Indicator

PSE: Producer Support Estimate

GSSE: General Services Support Estimate

CSE: Consumer Support Estimate

Stage

EXTRACT: Extraction or mining stage

TRANS: Transportation of fossil fuels (e.g., through pipelines)

REFIN:Refining or processing stage

GENER: Use of fossil fuels in electricity generation

INDUS: Use of fossil fuels in the industrial sector

END: Other end uses of fossil fuels

Statutory or Formal Incidence

consumption: Direct consumption

returns: Output Returns

income:Enterprise Income

inputs: Cost of Intermediate Inputs

labour: Labour

land: Land and natural resources

capital: Capital

knowledge: Knowledge

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Database
published : September 2015


These tables are a complement to the report Inventory of Estimates Budgetary Support and Tax Expenditures for Fossil Fuels 2015. They comprise the summary of fossil fuels support expenditures for OECD and BRIICS countries.

Complete documentation by country is available at:

Fossil Fuel Support - IDNAbstract



INDONESIA: GENERAL METADATA

DATA DOCUMENTATION

GENERAL NOTES

Until 2010, the Indonesian fiscal year ran from 1 April till 31 March of the following year. Following OECD conventions, for the years prior to 2011, data are allocated to the starting calendar year so that data covering the period April 2005 to March 2006 are allocated to 2005. After 2010, the Indonesian fiscal year coincides with the calendar year.

Most of the data were obtained from publications by the Global Subsidies Initiative, the Indonesian Ministry of Finance, the Ministry of Energy and Mineral Resources (MEMR), and SKK Migas (the energy regulator).

METHODOLOGICAL NOTE

A large part of support to fossil fuels in non-OECD countries (and in a few member countries such as Mexico) takes the form of price controls or regulations benefitting final consumers. In many cases, this occurs through the government mandating state-owned oil and gas companies to charge lower retail prices, thereby lowering the revenues these companies collect through sales of fuel. This often results in the government subsequently intervening to compensate state-owned oil and gas companies for the losses they incurred in the downstream sector due to the regulated prices, with this compensation taking many forms. Some governments choose, for example, to compensate national oil and gas companies through targeted tax concessions (e.g., VAT exemptions) or equity injections.

This inventory focusses on the direct budgetary transfers and tax expenditures that encourage the production or consumption of fossil fuels, including those benefitting national oil and gas companies. For this reason, some of the measures classified here under "Producer Support Estimate" may have been introduced by governments with a view to compensating domestic, vertically integrated oil and gas companies for the lower prices they are required to charge at the retail level, resulting in these measures being connected to some extent to consumer support.

Estimates of the support directly conferred to final consumers by regulated prices are available from the International Energy Agency (IEA), which estimates these induced transfers as part of its annual "World Energy Outlook" publication. Readers are therefore advised not to add together the OECD and IEA estimates given the significant risk of overlap and double-counting this involves.

PRODUCER SUPPORT ESTIMATE

Since 1966, International Oil Companies (IOCs) seeking to explore and develop oil or natural-gas resources in Indonesia have to enter into Production Sharing Contracts (PSCs) with the MEMR. The terms and conditions of the PSC system have varied with each "generation" of PSCs that has been issued since. The first generation applied from 1965 to 1975, the second generation from 1976 to 1987, and the third from 1988 until now. The main characteristics of the PSC system have, however, remained the same, namely that the government and IOCs share the production of the oil and natural gas rather than the resulting profits, and that the effective income for each side amounts to a share of the "First Tranche Petroleum" and an equity share of the profit oil after cost recovery. Since 2001, Pertamina is required to enter into a Work Agreement (WA) with SKK Migas (previously BP Migas, the energy regulator) for each of its operations, the terms and conditions for which are more or less the same than that for the PSCs. PSCs currently in force in Indonesia usually provide for the state to receive 70% of the produced natural gas, with contractors being allocated the remaining 30%. In the case of coal-bed methane (CBM), however, PSCs signed since 2007 have often featured a lower government share (45%).

Historically, the applicable income tax for companies operating in the upstream oil and natural-gas sector has been the prevailing income tax at the time that the PSC got signed, i.e. 25% as of 2013. The income tax applicable to the downstream sector normally also follows the prevailing tax law. However, as other industries in "high priority economic sectors", a number of downstream businesses can benefit from a number of income-tax concessions subject to approval by the Ministry of Finance. These businesses include: oil and natural-gas refineries, LNG and LPG producers, lubricant manufacturers, and the organic chemical industry using oil and natural gas as inputs. The list of income-tax concessions eligible taxpayers can receive includes additional net-income deductions (up to 30% of the amount invested), accelerated depreciation, the extension to ten years of the period for carrying losses forward, and a cap on withholding tax.

FOOTNOTES:

[1] Instead of a royalty, the Indonesian government charges a so-called "First Tranche Petroleum". This requires that the first 20% of production be shared in favour of the government and before cost recovery according to the equity split set in the contract (Johnston, 1994). In more recent PSCs, the government has taken the entire FTP, although in this case the FTP has usually been lowered to 10% of the first production.


http://www.oecd.org/site/tadffss/http://www.oecd.org/site/tadffss/Country notesftp://agrpub:public@ftp.oecd.org/FFS2015/IDN_country overview.pdfSourcesftp://agrpub:public@ftp.oecd.org/FFS2015/IDN_sources.pdf
Contact person/organisation

ffs.contact@oecd.orgmailto:ffs.contact@oecd.orgName of collection/source

Source: OECD, FFS database, 2015

Unit of measure usedRupiahPeriodicity

Fiscal Year starts on 1 July

Date last updated

Sep-15

Key statistical concept

Indicator

PSE: Producer Support Estimate

GSSE: General Services Support Estimate

CSE: Consumer Support Estimate

Stage

EXTRACT: Extraction or mining stage

TRANS: Transportation of fossil fuels (e.g., through pipelines)

REFIN:Refining or processing stage

GENER: Use of fossil fuels in electricity generation

INDUS: Use of fossil fuels in the industrial sector

END: Other end uses of fossil fuels

Statutory or Formal Incidence

consumption: Direct consumption

returns: Output Returns

income:Enterprise Income

inputs: Cost of Intermediate Inputs

labour: Labour

land: Land and natural resources

capital: Capital

knowledge: Knowledge

Recommended uses and limitations




Database
published : September 2015


These tables are a complement to the report Inventory of Estimates Budgetary Support and Tax Expenditures for Fossil Fuels 2015. They comprise the summary of fossil fuels support expenditures for OECD and BRIICS countries.

Complete documentation by country is available at: