Fuel prices higher for industry in May as rupiah drops

JAKARTA (JP): State oil and gas company Pertamina announced on Wednesday that it had raised May fuel prices for industrial users by an average of 11 percent due to a drop in the rupiah against the U.S. dollar.

Pertamina said in a statement that it increased the price for automotive diesel oil by 16.16 percent to Rp 1,150 (about 10.3 U.S. cents), from Rp 990; industrial diesel oil by 14.9 percent to Rp 1,115, from Rp 970; kerosene by 7.8 percent to Rp 1,165, from Rp 1,080; and bunker oil by 7 percent to Rp 825, from Rp 770.

These prices are 50 percent of last month's average international fuel prices, plus a 5 percent handling fee surcharge, Pertamina spokesman Ridwan Nyak Baik said.

"The cost of importing fuel will increase since the rupiah fell against the U.S. dollar," Ridwan said.

The rupiah was trading at around 10,000 against the U.S. dollar in early April, before political tension knocked it down to 11,000 at the end of the month.

This week the local unit has experienced a slight recovery, but currency analysts suspect prevailing political uncertainties to keep weighing on the rupiah.

Pertamina began pegging its fuel prices for industries to international prices in March under a government fuel subsidy reduction program.

The company sets the prices at 50 percent of the average Singapore Mid Oil Platts oil prices for the previous month. It charges another five percent for handling fees.

Foreign oil and gas, mining and shipping companies must pay fuel prices at 100 percent of international levels.

The price of fuel sold at gas stations remains unchanged, however the government still plans to increase them in October.

They initially planned a fuel price hike at gas stations for April but the move was delayed until October due to widespread dissatisfaction among the public.

Industrial users are not allowed to obtain their fuel supplies from street gas stations. Instead, they should purchase fuel through Pertamina's depots.

The country's lavish consumption of subsidized fuel is seen as one of the main culprits contributing to the government's difficulties in controlling a tight budget.

An expanding state budget deficit is forcing the government to tighten expenditure, lest the deficit fall beyond the predicted 3.7 percent of Gross Domestic Production (GDP).

The International Monetary Fund (IMF), which provides Indonesia with loans to support the country's deficit, requires that the government gradually remove the fuel subsidy.

This year, the government hopes to slash fuel subsidy spending by Rp 4.3 trillion, as stipulated in the 2001 state budget. (bkm)