Subsidy spending may be lower, says Pertamina<\/p>\n
Leony Aurora, The Jakarta Post, Jakarta<\/p>\n
The government could see the cost of this year's fuel subsidy
\ndecline to Rp 119.39 trillion (US$11.52 billion) or 13 percent
\nfrom the estimated Rp 138.6 trillion, giving ammunition to those
\nwho oppose plans for more fuel price hikes.<\/p>\n
With state oil and gas company PT Pertamina applying market
\nprices to fuel products it sells to big industries, domestic
\nsubsidized fuel sales this year are expected to amount to only Rp
\n99.38 trillion, offset by total supply costs of Rp 218.77
\ntrillion, a Pertamina official says.<\/p>\n
\"The (total cost of) the fuel subsidy will reach Rp 119.39
\ntrillion,\" Pertamina trading and marketing director Ari Soemarno
\nsaid at a hearing with the House of Representatives Commission
\nVII on energy and mining on Tuesday.<\/p>\n
The figures were based on current fuel prices and a total
\nvolume of 59.6 million kiloliters (kl), equal to the quota set by
\nthe House, said Ari.<\/p>\n
\"We can keep to the quota by taking out the fuel consumed by
\n(large) industries,\" said Ari. Since July, Pertamina has applied
\nmarket prices to fuel supplied to industries involved the oil and
\ngas sectors, along with mining and other large-scale industries,
\namounting to almost 6 million kl.<\/p>\n
The government earlier projected the cost of fuel subsidies
\nwould reach Rp 138.6 trillion -- assuming there is no price hike
\nthis year -- contributing to a budget deficit of Rp 48.3
\ntrillion, or 1.8 percent of the gross domestic product (GDP).<\/p>\n
The commission arranged the hearing to determine fuel costs
\nand revenues to deliberate the state budget's second revision
\nthis year. It has approved the presented expenses and sales.<\/p>\n
However, it questioned the alteration of quotas for specific
\nfuels proposed by Pertamina.<\/p>\n
With the lower-than-expected subsidy costs, the government
\nshould not need to raise fuel prices again, commission member
\nRamson Siagian said.<\/p>\n
\"It's not necessary to increase prices this year. The budget
\ncan survive this,\" said Ramson, who is also a member of the House
\nbudgetary committee.<\/p>\n
Favoring the fuel price hikes however, was commission chairman
\nAgusman Effendi, who supported the increases as long as the
\ngovernment could provide solid data about the number and criteria
\nof industries and individuals that would receive fuel subsidies.<\/p>\n
\"Personally, I think it would better to raise premium gasoline
\nand diesel fuel prices to market prices at once,\" he said.<\/p>\n
He was commenting on the government's three plans it is
\nconsidering to hike fuel prices. The first option is to set the
\nprices and increase them periodically according to the fuel
\nsubsidy cuts needed to reach a fiscal balance.<\/p>\n
The second is to determine a target date when formally
\nsubsidized fuels would reach market prices and raise prices in
\nphases, while the third was to directly apply market prices by
\ncompletely removing all subsidies.<\/p>\n
The government has said the prices of premium gasoline and
\ndiesel, currently about 40 percent of the market price, would
\nneed to be raised by between 11 percent and 12 percent a month to
\nreach market prices within a year.<\/p>\n
\"Is the government really going to raise prices every month?\"
\nsaid Agusman, adding that such a scheme would cause much anxiety
\nand be impractical.<\/p>\n
He said kerosene price hikes should be done in phases to take
\na longer time to meet the market price. \"But it should not take
\nlonger than two years,\" he said.<\/p>\n
Government scenarios include raising the price of kerosene
\nfrom the present Rp 700 a liter to the market price of about Rp
\n5,550 in two- and three-year plans.<\/p>",
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