Fuel price hike must go ahead: Megawati

Berni K. Moestafa, The Jakarta Post, Jakarta

As protests over plans to raise fuel prices mount, President Megawati Soekarnoputri admitted that it was a tough decision but, unlike her predecessors, said the government will not back down from the plan.

Elsewhere, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said that many people may be pleasantly surprised because the fuel price hike may not go as high as the reported 30 percent increase.

"The president said the rise in fuel prices and electricity rates are unpopular moves, but they cannot be canceled either," said general chairman of the Muhammadiyah Youth organization, Imam Addaruqutni as quoted by Antara on Wednesday.

Imam briefed reporters after his meeting with the President, in which they discussed among other items, the uncertainties created by the government's indecisiveness to set a date for the fuel price hike.

The government plans to raise the average fuel price by nearly 30 percent as part of spending cuts in the 2002 state budget.

The move also forms part of the economic reform target pledged to the International Monetary Fund (IMF).

The fuel price hike is set for January, but the date remains unclear. Some said Cabinet members today might decide on when exactly the fuel price hike would come into effect.

Announcing a date, however, is unwise as people will rush gas stations and kerosene retailers to stock up fuel in anticipation of the higher prices.

But critics said the current uncertainty is no less damaging.

Kerosene has been rapidly disappearing from the market since it was made known that prices could go up sometime in January.

Subsequently, in many regions prices for kerosene rose to as much as Rp 1,200 (about 11.5 U.S. cents) per liter from its official price of Rp 400.

Also, the longer the delay, the greater the likelihood that the fuel price hike protests will gain momentum.

Previous governments were very cautious about raising fuel prices, for fear of mass protests leading to political upheaval.

Former President Soeharto was forced to quit in part due to the pressure arising from the social unrest sparked by fuel price hike protests.

Then came president Abdurrahman Wahid who deferred fuel price hikes twice, a move that led to multiple inflation surges in the months preceding the planned hike.

Now, the government plans to allocate Rp 2.8 trillion in compensation funds to protect the poor from the higher fuel prices.

Imam said President Megawati told him the government wanted people to pay for their fuel and electricity, because of the huge subsidy spending the state budget must shoulder each year.

The government aims to cut fuel subsidy spending to Rp 30.37 trillion, or about eight percent of the state budget's total spending. Fuel subsidies amounted to Rp 53.774 trillion last year.

Minister Dorodjatun indicated that the fuel price hike may not reach the 30 percent as previously planned.

"We are not talking about a jump, a hefty jump in the price of gasoline...What is expected by the public is not going to be that large...It's going to amaze them," he told Reuters.

This may be possible as international fuel prices have been hovering at rates below the $22 a barrel assumed in the state budget.