Fuel price hike seen at 20-25%
Fuel price hike seen at 20-25%
Berni K. Moestafa, The Jakarta Post, Jakarta
The government said on Thursday it was expecting to raise
fuel prices this month by an average of between 20 percent to 25
percent, down from the original proposed 30 percent price hike.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said the government may not need to raise fuel prices by an
average of 30 percent to limit fuel subsidy spending to Rp 30.37
trillion (about US$2.9 billion).
"If given a range, it (the average price hike) could be 20
percent, 22 percent, up to 25 percent," Purnomo told reporters
after a cabinet meeting.
But he added that neither the price range nor the date for the
fuel price hike were set. The cabinet would have the final say,
he said.
Using assumptions in the 2002 state budget, the government
would need to raise fuel prices by an average of 30 percent to
limit subsidies to Rp 30.5 trillion as opposed to Rp 53.77
trillion last year.
"But one assumption has changed, that is the price of fuel,"
Purnomo said, explaining this allowed for a lower than planned
price hike.
World crude oil prices, he said, had weakened to between $19
to $20 a barrel compared to the $22 assumed in the state budget.
While lower crude prices translate into lower subsidy
spending, Indonesia actually benefits more when fuel prices are
high.
A member of the Organization of Petroleum Exporting Countries
(OPEC), Indonesia is projected to earn Rp 44 trillion for crude
oil exports, assuming however that prices average $22 a barrel.
Since the government foresees crude prices remaining weak
throughout the year, it must take into account a shortfall in
revenue from oil exports.
This will add pressure on efforts to keep the budget deficit
at 2.7 percent of gross domestic product (GDP) this year.
Purnomo would not say how low oil revenues might fall this
year. According to him, there is a possibility of a slight upturn
in the second quarter on a seasonal rise in oil demand.
Slashing fuel subsidies is one savings area the government
relies on to safeguard the budget's sustainability.
However, saving up on subsidies always comes at the expense of
the poor, who must shoulder the subsequent surge in inflation.
To protect the lower income groups, and to reduce the risk of
wide-spread protests against the fuel price hike, the government
promised Rp 2.8 trillion for social compensation funds.
Coordinating Minister for the Economy, Dorodjatun Kuntjoro-
Jakti said the funds aimed to support the poor with food, health,
transportation, education, clean water, small- and- medium-sized
enterprises, cooperatives and through empowerment programs for
fishing communities.
Education would receive the biggest slice of the funds with Rp
1.28 trillion, followed by health and social support with Rp 570
billion and food support with Rp 500 billion.
Coordinating Minister for Social Welfare, Jusuf Kalla said Rp
2.8 trillion should be enough to alleviate living expenses for 55
million people among the lower income groups.
"The number of poor people in Indonesia makes up 19 percent of
the entire population, or 40 million people," he said.
"If a (poor) person pays more for fuel, the same person will
pay less for rice, education, medicines."
Last year, the government spent Rp 800 billion in compensation
following the rise in fuel prices. Dorodjatun has said there were
complaints that much of the funds had missed their targets.
He promised to audit the use of the funds, starting from last
year's allocation.