Fuel price hike effective today

JAKARTA (JP): The government finally raised fuel prices by a hefty 30 percent late on Friday, just one day after it had decided to delay the plan due to concerns over its social and security implications.

Newly appointed Coordinating Minister for the Economy Burhanuddin Abdullah said the new fuel prices would take affect as of Saturday.

"The fuel price hike is a difficult decision, but it is needed to reduce the ballooning deficit in the state budget," he said, during the announcement of the new fuel prices.

Under the new increase, the price of premium leaded gasoline is raised by 26 percent to Rp 1,450 (about 12.8 U.S cents) per liter from 1,150; automotive diesel oil by 50 percent to Rp 900 per liter from Rp 600; and kerosene by 14.28 percent to Rp 400 from Rp 350 per liter.

Burhanuddin said that the fuel price increase would help reduce fuel subsidy expenditure by Rp 6.2 trillion (about US$550 million) from an estimated Rp 60 trillion, to Rp 53.8 trillion.

The increase will not affect the price of industrial diesel fuel and bunker fuel, which have been set at 50 percent of international market prices.

Since April, the government has sold diesel fuel to industrial users at 50 percent of market prices, and at 100 percent of market rates for foreign mining, oil and gas, and shipping companies.

Head of the National Development Planning Agency (Bappenas), Djunaedi Hadisumarto gave an assurance that fares for city buses, trains fares for Jakarta and its environs, and ferries would not be increased, despite the fuel price hike.

As compensation, he said, the government would set aside Rp 216.4 billion to operators of such transportation to help them cope with the higher prices.

The last time the government raised fuel prices was in October last year, with an average increase of 12 percent for all users.

The latest announcement came just a day after the government unexpectedly decided to delay the plan.

The government initially set the fuel price hike for Friday, but it was postponed, following mass demonstrations by laborers in major cities across the country, with some turning violent.

When former president Soeharto raised fuel prices in 1998, it led to a series of riots that resulted in his downfall.

The current plan was approved by the House of Representatives just one week before its implementation.

The raising of fuel prices is a vital component of the government's proposed revisions to the state budget that have been demanded by Indonesia's main donor, the International Monetary Fund, to limit the widening budget deficit to a safe level.

As news spread of the fuel price hike, motorists in Jakarta began lining up at about 10 p.m. to beat the midnight deadline.

However, due probably to the late hour of the announcement and the fact that rain drenched many parts of the capital, the run was not apparent in all parts of the city.

Two popular gas stations located on Jl. Jend. Sudirman, South Jakarta, were packed, as a queue of about 40 cars spilled out into the road.

Police were observed guarding several gas stations in the Pejompongan area of Central Jakarta, and at Pondok Indah in South Jakarta.

Despite the late hour, congestion was clearly evident near Pondok Indah Mall as motorists queued at a nearby gas station.

However, some gas stations in Ciputat, South Jakarta that normally open till late were closed.

Meanwhile, to allay fears of fuel scarcity because of a run on fuel, state oil and gas company Pertamina guaranteed that supplies were safe.

Pertamina president Baihaki Hakim said a run would have little impact on the nation's fuel supplies.

He said that national fuel stocks were full, sufficient for 22 days, and that refineries and fuel distribution channels were operating normally.

Djunaedi further said that the government would allocate Rp 2.2 trillion for various programs aimed at alleviating the impact the fuel price hike would have on the poor.

"Under the program to mitigate the impact of the cut in the energy subsidy, the purpose is to maintain the purchasing power of the lower income bracket or the poor," he said.

Under this program, he said, the government would allocate Rp 279.9 billion to provide rice at cheaper prices for 1.2 million poor families.

The government would further spend Rp 534.1 billion in vaccination programs for children, and other medical needs of the poor.

Some Rp 833.5 billion would be allocated to provide, among other things, scholarships and to pay for school renovation.

Around 314 poor settlements would receive clean water, for which the government would set aside Rp 174 billion.

It also planned to provide 1,000 small enterprises with cheap loans worth in total Rp 53 billion.

The government hoped to spend another Rp 105.8 billion on the empowerment of fishing communities.

Djunaedi, however, added these programs had yet to receive the House's approval, as the proposed budget revisions were still under debate. (bkm)