Fuel price increase maybe lower than 30%

Fuel price increase maybe lower than 30%

The Jakarta Post, Jakarta

The government will go ahead with its plan to raise fuel
prices, but the price hike will not reach 30 percent as approved
by the House of Representatives, Minister of Energy and Mineral
Resources Purnomo Yusgiantoro said Tuesday.

"Now, we have yet to decide the percentage of the price hike.
Perhaps the hike will not reach 30 percent. It might be 25
percent or even 15 percent. The point is, we do not want to
burden people," he was quoted by Antara as saying.

The fuel price increase could be moderate given the decreasing
trend in the oil price, Purnomo said.

At present, the world price of oil is hovering around US$21
per barrel, below the assumption of the 2002 state budget at $22
per barrel.

The House has approved the government's plan to raise fuel
prices by up to 30 percent this year as part of the efforts to
cut fuel subsidies.

The exact timeframe for the fuel price increase remains
unclear but Coordinating Minister for the Economy Dorodjatun
Kuntjoro-Jakti earlier said the price increases would be
implemented this month.

Purnomo reiterated that the government would delay raising the
fuel prices because it could further boost the government's
subsidy, which is projected at Rp 30.37 trillion (US$2.9 billion)
this year.

Should the hike be delayed for one month, the subsidy could
rise by Rp 1 trillion, he added.

Separately, president of state electricity company PT PLN
Eddie Widiono said that PLN had raised electricity rates by an
average of six percent for this month's bill.

Eddie said the hike was necessary to help improve the
company's financial performance and to reduce the government's
subsidies to the company.

"The hike is effective on Jan. 1. This is the first hike of
our plan to increase electricity rates by an average of six
percent every three months this year," he was quoted by Antara as
saying.

PLN has suffered losses for years because it sells the power
below its production costs. At present, electricity rates paid by
consumers average Rp 360 per kilowatt hour (kWh) while PLN's
costs average out to Rp 466 per kWh.

The House has approved the government's proposal to raise
power rates by an average of six percent for every three months
this year. This aims to reduce PLN's subsidy to Rp 4.1 trillion
this year from last year's subsidy of Rp 4.7 trillion.

Eddie said that the power price increases would lift PLN's
revenue by about Rp 5.4 trillion, but this would be enough to
cover the company's operating costs.

Despite the power price increase, he said, PLN would still
suffer Rp 200 billion in losses this year.

According to Eddie, PLN's expenses are projected to reach Rp
43.9 trillion this year, while its revenue, including the
government's subsidy, will stand at Rp 43.7 trillion.

These figures contrast with the ones earlier presented PLN's
finance director Parno Isworo, who said the price increase would
lift PLN's revenue by Rp 10 trillion this year. But, he said, PLN
would still suffer a Rp 1 trillion loss.

Eddie also said the power price hike would financially enable
PLN to build 1.2 million new power lines for small-income
households across the nation. This is however, far lower than the
total demand of 4.5 million new power lines from that category of
customers.