Governement rules out immediate hikes in fuel prices

JAKARTA (JP): Minister of Mines and Energy Susilo Bambang Yudhoyono ruled out on Friday any immediate hikes in domestic fuel prices despite soaring costs to the government.

The present economic condition makes it unlikely for the government to cut fuel subsidies, Bambang told reporters.

"We have to consider the people's low purchasing power," the Army lieutenant general said.

This was his first media conference since becoming a minister on Oct. 29. He delayed meeting journalists, preferring to master his portfolio first.

High world oil prices have been a double-edged sword for the government. While revenue was raised from oil and gas taxes, it also meant higher costs to subsidize domestic fuel prices.

Bambang estimated that the government would have to fork out Rp 27.5 trillion (US$3.85 billion) in fuel subsidies in the current fiscal year ending March 31, nearly threefold the initial target of 9.9 trillion.

World oil prices currently hover at about $24 a barrel. When the current budget was prepared in January, it assumed the average oil price was $10.50 a barrel for the 1999/2000 year.

The high world oil prices meant a windfall of some Rp 18.8 trillion ($2.64 billion) to the government this year, Bambang said.

Minister of Finance Bambang Sudibyo said that in drafting the new budget, the government would phase out subsidies and raise taxes to reduce its dependence on foreign aid.

Bambang Yudhoyono said, however, that the government would only begin reducing fuel subsidies when "the time is right".

Any plan to cut fuel subsidies would be openly discussed with the public, he said. "The government will discuss with experts, analysts and the business community about the position of subsidies in the national economy," he said.

Bambang defended the policy of subsidizing the industrial sector to help them keep costs low and stay competitive.

The fuel subsidy policy was criticized for benefiting the wealthy urban population more than poor rural people.

Bambang declined to comment on rumors that President Abdurrahman Wahid planned to replace Martiono Hadianto, the president of state oil Pertamina, with I.G. Bagus Oka, the former president of energy company Arco Indonesia.

Martiono said he had not heard about any plans to replace him. "I have not been contacted by the President," he said after meeting the minister on Friday morning.

Martiono said much work still had to be done in restructuring Pertamina to turn it into a more efficient company.

Independent auditor PricewaterhouseCoopers (PwC) revealed that Pertamina lost over US$2 billion due to inefficiencies. (03)