Government considering presidential decree on fuel price policy

JAKARTA (JP): The government is considering to issue a presidential decree to require export oriented companies to buy fuel at international prices, according to a senior government official.

"We are working on it (the decree); it is being prepared," director general for oil and gas at the Ministry of Energy and Mineral Resources Rachmat Sudibyo told reporters on Friday.

State oil and gas company Pertamina has urged the government to issue a presidential decree, since persuading export oriented companies to buy fuel at market prices was futile.

The company said a decree was necessary to give Pertamina a legal base when imposing international fuel prices to export oriented companies.

Rachmat said the government was unsure whether to issue a specific decree on the policy, or combine it with another one, which will impose another hike in fuel prices.

According to him, the government plans to cut fuel subsidy spending again next April; the second time under President Abdurrahman Wahid's administration.

"We might issue a decree either before April, or by April 1 when fuel prices are to be raised," he explained.

Rachmat, however, did not elaborate further on the plan.

Pertamina president Baihaki Hakim has said that export oriented companies consumed up to Rp 9 trillion (US$947.36 million) in government's fuel subsidy, although they could afford buying fuel at market prices.

This year alone the government has earmarked Rp 22.46 trillion for fuel imports, but higher crude oil prices and a weaker rupiah are likely to push subsidy spending to over Rp 30 trillion.

Thus far, the government had ordered Pertamina to "persuade" export oriented companies to stop consuming subsidized fuel.

But Baihaki called the approach ineffective.

The state company already issued earlier this year directives telling export oriented companies to buy fuel at international prices.

Industrial associations, however, protested the move and this prompted the government to order Pertamina to withdraw its plan.

Among the companies that have long protested the hike is the Djajanti Group, a giant fishery and forestry concern operating in the eastern part of Indonesia.

Hadi Budoyo a director at the Djajanti Group warned of mass layoffs if the government proceeded with the plan to raise fuel prices.

The company is experiencing difficult times, foremost in Maluku where prolonged religious conflicts has brought the company's fishery operation to a grinding halt.

"The fuel price increase is too sudden, we want it to be implemented gradually," Hadi told The Jakarta Post over the weekend.

He added that the government planned to peg fuel prices to its production cost at Pertamina and not to the international market price.

Djajanti's subsidiaries, he said, consumed a total of 14,000 kiloliters of diesel oil per month, at a price of Rp 600 per liter, or Rp 1,200 if pegged to its production cost.(bkm)