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Thursday, 9 March 2017
MOT: Government to Subsidize Air Cargo Transportation
The Transport Ministry (MOT) is set to revise a regulation on subsidized cargo to include airfreight as an initiative to carry staple goods to remote places. The regulation will commence in 2017. Currently, the subsidy only applies to scheduled sea transportation. Subsidized cargo shipping services were launched in 2015, and with subsidized airfreight services included, the government aims to reduce logistics costs. Indonesia's logistics costs in 2016 were 23.5 percent of GDP, the highest in the ASEAN region. The reason for such high costs is the lack of infrastructure and the uncertainty in scheduling of such services.
The Indonesian National Air Carriers Association (INACA) has welcomed the move and sees huge potential with the program, providing that the government offers substantial subsidies for freight costs. The high prices in the remote areas of the archipelago have led to a price disparity, and the government hopes to bring down the costs for such regions through their subsidized shipping and airfreight services. The shipping services carry rice, sugar, flour, cooking oil, eggs, steel, and cement. The government is yet to decide the form of subsidy and types of goods to be included in the airfreight program.
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