Despite objections from the House of Representatives, the

Despite objections from the House of Representatives, the
government will press ahead with its plan to increase domestic
fuel prices, saying it is only trying to fulfill the fuel subsidy
allocation as required by the 2005 state budget.

"We respect the House, but the government must implement the
budget, which the House passed into law, and which limits the
subsidy to Rp 19 trillion," Vice President Jusuf Kalla told
reporters on Thursday. "We have yet to meet this target."

The figure was stated in the 2005 state budget, and approved
late last year by the House with an assumption that oil prices
would average US$24 per barrel.

Kalla explained that without the hike expenditure for fuel
subsidies would reach Rp 100 trillion -- taking into account the
present oil price of more than $45 a barrel -- which is far more
than the amount allocated in the budget.

Against this backdrop, the government has no alternative but
to hike fuel prices in the near future, Kalla said, though he
refused to say when the hike would actually be implemented.

Kalla asserted that both he and the President were not worried
that such an unpopular decision would tarnish their image. "Our
image would be worse if we could not deliver good education and
health services because of lack of funds," he replied
diplomatically.

Under the so-called compensation program, the government would
allocate some Rp 10 trillion in welfare expenditure -- mostly on
education and healthcare -- in addition to the Rp 7.8 trillion
already set aside under the 2005 state budget.

Still, the government's plans will likely meet opposition from
some legislators, who have voiced fears over the impact of the
price rise on the poor. Top government officials and the House's
budget committee were still discussing the issue at 9.30 p.m. on
Thursday.

Among the main stumbling blocks in the lawmakers approving the
plan is a request by the Commission for an audit of Pertamina's
fuel production costs in order to calculate more accurately
subsidy allocations for fuel prices.

Based on a rough calculations by the Ministry of Finance, with
fuel costing about Rp 2,870 per liter, assuming an oil price of
$35 per barrel, and with a current market price of Rp 1,810 per
liter, this means that the government is paying a subsidy of Rp
1,000 per liter.

Roes Aryawidjaja, deputy to State Minister of State
Enterprises for telecommunication, energy and strategic
industries, warned that it would not be easy to accurately
calculate Pertamina's production costs, as the state-owned firm
is not only obliged produce and distribute fuel for commercial
purposes, but also for public service obligations (PSO) also.

Roes added that a clear separation between production costs
for PSO and for profit will only be applied sometime this year,
meaning that the government will only be able to calculate real
production costs for fuel sometime next year.

Elsewhere, Minister of Trade Mari Pangestu said her ministry
has taken necessary measures to ensure the distribution of basic
food items and to prevent price hikes due to higher fuel costs.

"We have met with related trade associations, and they have
given a guarantee to provide sufficient stocks of their goods
both before and after the fuel price increase," she said.

In Surabaya, former president Megawati Soekarnoputri expressed
her disappointment over the government's plan, saying it was
unnecessary and not in line with Susilo's promises during the
presidential election campaign.

Although she could understand the government's rationale for
the hike, Megawati said that it should not come at the expense of
the people.

Meanwhile, observations by The Post have revealed that a
shortage of kerosene -- mainly used by low-income people -- has
spread throughout the city.

Several kerosene agents had run out of stock two days ago, and
said that supply tanks, which usually come once a week, have not
been arriving on time.