Fuel prices must not increase amid crisis: Analysts

JAKARTA (JP): Analysts urged the government yesterday not to raise fuel prices until the current monetary crisis was over to prevent the country's economy from worsening.

Two observers, former minister of mines and energy Subroto and former legislator Tadjuddin Noor Said, told The Jakarta Post that fuel price stability at present would help the general public cope with the financial crisis, although the government would have to spend greatly on fuel subsidies.

"An increase in fuel prices at the moment would only worsen the pains being suffered by the public," Tadjuddin said.

Subroto agreed that higher fuel prices amid the monetary crisis would only shock the public and would make things worse.

Both commented on President Soeharto's speech before the House of Representatives on the country's budget proposal for fiscal 1998/1999 on Tuesday.

Soeharto said the government would allocate Rp 10.1 trillion toward fuel oil price subsidies, but hinted that the government would raise fuel prices to reduce the "extremely large" subsidies.

"At some time, it will be unavoidable that the price of fuel will be raised to reflect its economic value," Soeharto said. He did not say when the fuel prices would be raised.

Indonesia depends partly on imported fuel since refineries owned by state oil and gas company Pertamina cannot meet domestic demand. It also imports certain kinds of crude oil to feed Pertamina's refineries.

The country used 50.2 million kiloliters of fuel during fiscal 1996/1997, of which 22.7 percent, or 11.4 million kiloliters, was imported.

Fuel prices were raised in 1993 under a presidential decree to between Rp 240 and Rp 420 per liter.

Soeharto said the low fuel prices did not encourage people to use fuel economically nor stimulate the development of alternative energies.

The low price had even caused fuel smuggling, he said.

Subroto said the government could raise fuel prices on several conditions, including when the monetary situation stabilized and the inflation rate was reduced to less than 10 percent.

He predicted monetary stability would take place by the end of the next fiscal year in March 1999.

Subroto said if the government decided to raise fuel prices, the price of fuel most used by ordinary people, kerosene, should be raised the least of all to prevent a widespread impact.

"The government has to carefully study the composition of domestic fuel consumption before raising fuel prices," Subroto said.

Subroto criticized the government's way of raising fuel prices in the past as "causing a lot of shock".

The government usually announced a fuel price increase late at night to prevent people from hoarding fuel beforehand, he said.

He proposed an alternative method in which fuel prices would be adjusted gradually without causing much surprise or shock.

Fuel prices should be adjusted according to several variables, including inflation, the rupiah's rate against the dollar and international oil prices, he said.

"This method has been applied to some public utilities, including electricity," he said. (jsk)