Government considers lifting PLN fuel subsidies
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)