House agrees on 30% increase in fuel prices<\/p>\n
Dadan Wijaksana
\nThe Jakarta Post
\nJakarta<\/p>\n
The House of Representatives budget committee approved on
\nMonday a government proposal to increase fuel prices by an
\naverage 30 percent starting January next year, but delayed once
\nagain the completion of a crucial debate on the 2002 draft state
\nbudget.<\/p>\n
The fuel price increase will reduce the government fuel
\nsubsidy and help ease the burden on the state budget.<\/p>\n
\"The 30 percent increase is final. We cannot afford an
\nincrease of more than that,\" committee chairman Benny Pasaribu
\nsaid during the debate, which was also attended by Minister of
\nFinance Boediono.<\/p>\n
Benny also warned that the increase would be introduced
\ngradually to avoid negative reactions from the public.<\/p>\n
Fuel price increases have been a politically sensitive issue
\nin the country as it affects almost all sectors in society.<\/p>\n
The fuel subsidy reduction is part of the cash-strapped
\ngovernment's agreement with the International Monetary Fund,
\nwhich has pledged a multibillion dollar loan to help the country
\nresolve its economic problems.<\/p>\n
Government spending on the fuel subsidy for next year is set
\nto decrease from this year's Rp 53.77 trillion (US$5.33 billion).<\/p>\n
The House budget committee, however, has yet to decide on the
\nexact amount to be allocated for the fuel subsidy, pending
\nfurther discussion on the subject.<\/p>\n
The government previously proposed a Rp 32.92 trillion fuel
\nsubsidy.<\/p>\n
Monday's session decided that the volume of fuel to be
\nsubsidized by the government would total 52.77 million
\nkiloliters, which is below the 55.79 million kiloliters proposed
\nby state oil and gas company Pertamina.<\/p>\n
Pertamina had argued that its figure was based on the expected
\nreal fuel demand next year. But the House decision means that any
\nexcess demand would not be subsidized by the government, which
\nwould force Pertamina to sell at international prices.<\/p>\n
The amount of fuel to be subsidized is 12.91 million
\nkiloliters of premium, 19.97 million kiloliters of automotive
\ndiesel fuel, 1.7 million kiloliters of industrial diesel fuel and
\n6.85 million kiloliters of fuel oil.<\/p>\n
During Monday's deliberation, the committee questioned
\nPertamina's ability to eradicate rampant fuel smuggling and
\nimprove the company's efficiency.<\/p>\n
The massive government fuel subsidy has encouraged rampant
\nfuel smuggling out of the country.<\/p>\n
Director General for Oil and Gas Rachmat Sudibyo said that so
\nfar, although a special team had been set up to solve the
\nproblem, fuel smuggling had remained very difficult to deal with.
\nHe cited a low budget as the biggest obstacle.<\/p>\n
Elsewhere, Benny ensured that despite the delay the committee
\nwould be able to complete the budget debate on Tuesday to allow
\nthe House plenary session to approve the proposed state budget on
\nWednesday, before the House starts its month-long recess.<\/p>\n
\"Hopefully the (plenary) meeting will go ahead as scheduled,\"
\nhe said.<\/p>\n
The committee was supposed to complete the debate last week.
\nThe delay has raised concerns that the House might have to
\napprove the budget after the recess period in December. This
\nwould create various problems, including difficulties for
\nregional administrations to draw up their own budgets, which
\ncould in turn lead to fresh social and political unrest in the
\ncountry.<\/p>\n
\"I hope there won't be any more obstacles (to finishing the
\njob). We'll complete the debates tomorrow (Tuesday),\" Benny said.<\/p>\n
The committee had earlier approved the 2002 budget
\nassumptions, which had to be revised amid the looming world
\neconomic slump. The assumptions include economic growth of 4
\npercent (from the original projection of 5 percent), a 9 percent
\ninflation rate (from 8 percent), an exchange rate of 9,000 per
\nU.S. dollar, Bank Indonesia promissory note (SBI) interest rate
\nof 14 percent, oil price of $22 per barrel (unchanged).<\/p>\n
The committee had also approve the various components of state
\nrevenue including tax revenue of Rp 219.63 trillion, and nontax
\nrevenue of Rp 82.25 trillion.<\/p>\n
Tuesday's debate will focus on nonfuel subsidy issues
\nincluding the planned subsidy for electricity, another sensitive
\nand difficult issue.<\/p>\n
The government has proposed a Rp 14.524 trillion nonfuel
\nsubsidy.<\/p>",
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