Government considers lifting PLN fuel subsidies
JAKARTA (JP): The government is considering raising the fuel price charged to state-owned electricity company PT PLN to as high as 50 percent of the international market price in order to cut fuel subsidies and trim its state budget deficit, an official said on Thursday.
Kardaya Warnika, an expert economics and finance staff member at the Ministry of Energy and Mineral Resources, said the move would make PLN equal with other industrial fuel users.
"We believe fuel subsidies should go directly and entirely to the people, and not the industries. We cannot call PLN people," Kardaya told The Jakarta Post.
At present, PLN buys fuel at the same prices that motorists pay at gas stations, or only about one-fifth of the going price in neighboring countries.
The government exempted the company when it hiked fuel prices for industrial users in April up to 50 percent of the international market price.
Among the government's consideration for exempting PLN was the company's financial difficulties.
PLN, which has booked losses for the last three consecutive years, is predicted to suffer an estimated loss of about Rp 22 trillion (about US$2 billion) in this year alone.
The company has blamed the deficit mainly on government-fixed low electricity rates, which cannot cover its cost of buying power from independent power producers.
Kardaya further said the government was mulling the possibility of restricting the fuel subsidy scheme to those fuel types that are sold mostly to the public.
Fuel subsidies on bunker oil and diesel oil, which are mainly used by industrial users, should be entirely pegged at 50 percent of the market price, he said.
Therefore, the fuel types with prices regulated under the presidential decree are premium, automotive diesel oil and kerosene, he continued.
Even these fuels, he said, may be subject to price hikes in the near future.
Coordinating Minister for the Economy Rizal Ramli said earlier that the government may raise fuel prices by an average of 30 percent this year.
The government plans to cut this year's fuel subsidy spending up to Rp 41.3 trillion from an estimated Rp 66 trillion.
Lifting fuel subsidies would help the government limit its state budget to about 3.7 percent of the gross domestic product (GDP), or some Rp 53 trillion.
He said the longer the government waits before cutting fuel subsidies, the higher the increase might have to be to keep the total fuel subsidy at the targeted Rp 41.3 trillion.
Kardaya said the three schemes -- PLN's fuel subsidy cut, restricting fuel subsidies to three fuel types and hiking fuel prices to the public -- were still being studied by the government.
He declined to say when the government would seek approval from the House of Representatives for a fuel subsidy cut scheme.
"The sooner the better, because it will bring better certainty to everyone and that is important," he said. (bkm)