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Indonesia postpones new levy on gasoline and diesel

JAKARTA, Jan 4 (Reuters) - Indonesia has postponed a new levy on fossil fuels intended to support development of renewable energy resources and improve energy security, its energy minister said on Monday, a day before it had been due to come into effect.

The decision highlights the difficulties President Joko Widodo faces in devising an energy policy for Southeast Asia’s largest economy, the world’s top exporter of thermal coal, while meeting environmental commitments.

“Everyone agrees - it’s just the timing of the implementation that needs to be managed,” Energy Minister Sudirman Said told reporters, referring to a discussion of the matter with President Joko Widodo and other members of his cabinet.

Fuel prices are politically sensitive in Indonesia, and changes typically spark protests and contributed to the downfall of long-serving autocrat and then president Suharto in 1998.

Widodo had requested the levy be delayed until the revision of this year’s budget in order “to avoid controversy”, Said said, who noted that the levy was needed to help bring power to 12,000 villages across the archipelago.

The government had planned to impose a 200 rupiah ($0.0147) tax per litre on sales of RON88 gasoline and 300 rupiah per litre on diesel, that would coincide with a planned reduction in fuel prices. On Monday, however, the government decided to cut fuel prices without imposing the levy.

The new tax will eventually be applied to “all companies that manage fossil energy, including oil, gas and coal,” Said said, noting that further details would be outlined in a government regulation. The levy on coal was due to be introduced later. The government has not said when it will revise this year’s budget.

Indonesia is the world’s fifth-largest emitter of greenhouse gases. Planning Minister Sofyan Djalil said the government wants renewable sources to contribute 23 percent of the country’s energy mix by 2025, up from 6 percent in 2014.

“New and renewable energy is expensive now, so it needs a special policy,” Djalil told reporters.

“How about we take some of this money (from fuel sales) to develop new and renewable energy,” he said. “If we don’t do this, the world will be hit with global warming.”

A new tax could add to pressure on Indonesia’s coal industry and potentially reduce output further after a 16 percent slide in 2015, largely driven by low prices.

Said said revenue raised from the new tax could be used to improve access to electricity, to develop strategic energy reserves and to incentivise the energy sector.

Indonesia has pledged to cut greenhouse gas emissions growth by 29 percent by 2030. But it also plans to develop more than 35 gigawatts of new power stations by 2019, almost 80 percent of them coal-fired. (Reporting by Jakarta bureau; Writing by Fergus Jensen; Editing by Susan Fenton)

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