Government determined not to raise fuel prices in 2004
Ridwan Max Sijabat, The Jakarta Post, Jakarta
Despite increasing world oil prices, the government is adamant that it will not raise fuel prices for transportation or households this year.
"After a series of discussions, President Megawati Soekarnoputri has agreed not to raise fuel prices this year due to the political conditions at home," Minister of Energy and Mineral Resources Purnomo Yusgiantoro told The Jakarta Post at his residence here over the weekend.
The President, who is the leader of the Indonesian Democratic Party of Struggle (PDI-P), could see her own reelection bid derailed and her party's prospects damaged in the upcoming elections if the government took the extremely unpopular step of raising fuel prices, Purnomo said.
In case of an "emergency", the new government formed in November might raise fuel prices, he said.
"But if Megawati remains in power, the fuel prices will be raised next January at the soonest after a new Cabinet is formed in November or December," he said.
This year's state budget allocates Rp 14.7 trillion (US$1.73 billion) for an oil subsidy, on an oil price assumption of $22 per barrel. However, oil prices have been hovering at about $33 over the past several weeks after the Organization of Petroleum Exporting Countries (OPEC) cut supplies.
When proposing the subsidy to the House of Representatives last year, the government said it would ensure no fuel price increases in 2004.
Asked about the possibility of a bigger subsidy due to the rise world oil prices, the minister said: "It is the economic cost the government has to pay for political gain."
Indonesia, as a member of OPEC, will reap windfall profits from the increase in oil prices, but it will also have to pay a higher subsidy in order to keep domestic fuel prices unchanged this year.
Purnomo predicted that world oil prices would remain at $33 per barrel over the next several months because of the long winter in Europe and North America and Iraq's failure to reach its targeted production of 300,000 barrels per day.
"Demand will remain unchanged over the next several months," he said, adding that he has encouraged OPEC to maintain its current output level of 24.5 million barrels per day because Russia was quite eager to increase its production to about eight million barrels per day.
The government has consistently raised fuel prices over the past several months in a bid to reduce fuel subsidies. Currently, non-subsidized fuel is sold only to mining and oil companies, while households, the transportation industry and other industries still enjoy subsidies.
Fuel prices for households, transportation and non-mining and oil industries now stand at Rp 1,810 per liter for Premium gasoline, Rp 1,650 per liter for diesel oil and Rp 1,560 per liter for bunker oil. Kerosene sells for Rp 700 per liter for households and Rp 1,800 for large industries.
On Sunday, state oil and gas company Pertamina, the sole distributor of fuel in the country, raised the price of high- octane Pertamax and Pertamax Plus gasolines to Rp 2,450 and Rp 2,750 per liter, from Rp 2,300 and Rp 2,600 per liter respectively. These two gasolines, which are mainly used for private vehicles, are not subsidized by the government.