Government adds fuel to price increase list

Government adds fuel to price increase list

A'an Suryana, The Jakarta Post, Jakarta

Instead of chomping down headache tablets for those nursing New
Year's Day hangovers, Indonesians were forced to swallow a more
bitter pill in the form of sharp price increases dispensed by the
government in a bid to lift the country out of its economic ills.

Fuel price hikes of up to 22 percent, effective as of
Thursday, were announced Wednesday.

The announcement coincides with an average six percent
increase in electricity tariffs and an average 15 percent rise in
telephone rates.

The price of premium gasoline was set at Rp 1,810 (about 20
U.S. cents) per liter from Rp 1,750, while automotive diesel
climbed to Rp 1,890 from Rp 1,550.

And the government's fuel ceiling prices, the maximum limit
prices can increase to in a year, have also been raised, meaning
prices, set each month, could continue to climb, depending on
international oil prices.

Last year the government, aiming to reduce costly fuel
subsidies provided to all but a few sectors, scrapped policy
which set the domestic price of fuel products at 75 percent of
market prices in Singapore.

The ceiling price of premium gasoline was raised to Rp 2,100
per liter from Rp 1,750 in 2002. The floor price, the lowest
prices can drop, was set at Rp 1,650 from Rp 1,450.

The floor and ceiling prices for automotive diesel were set
higher at Rp 1,650 and Rp 2,100 respectively.

Floor and ceiling prices for industrial diesel, bunker oil and
kerosene for industry were respectively set at Rp 1,600 and Rp
2,050; Rp 1,150 and Rp 1,600; Rp 1,800 and Rp 2,200.

The government only slightly increased the price of kerosene
to Rp 700 per liter from Rp 600. The subsidy for this commodity
remains huge because it is widely used by low-income people.

The government was forced to cut the subsidy because of the
nation's massive debt. The government also said the heavily
subsidized fuel was being exploited by fuel smugglers.

To counter criticism, the government said the income gained
from the subsidy cut would help finance welfare programs for the
poor.

The hike in electricity charges is also in line with the
subsidy cut strategy. Tariffs will increase 24 percent this year,
with six percent increases every quarter.

The Indonesian Consumer Foundation (YLKI) has criticized the
increases, saying it will create serious economic hardship for
the people.

YLKI urged Indonesian's to protest.

Economist Didik J. Rachbini said the government had unfairly
shifted the burden of the economic crisis to the people, who had
been unable to raise their incomes because the government had
failed to spur economic growth.

But economist Muhamad Ikhsan said that this year's price hikes
were inevitable as they had been postponed several times.

He played down the possible inflationary impact of the price
hikes, citing an example of a 6 percent to 24 percent electricity
price increase two years ago that had only a small effect on
inflation.