Government, House agree on 12% hike in fuel prices

Government, House agree on 12% hike in fuel prices

JAKARTA (JP): The government and the House of Representatives'
state budget committee agreed on Monday to raise fuel prices an
average of 12 percent beginning in April, according to Minister
of Mines and Energy Susilo Bambang Yudhoyono.

Bambang said the price of premium gasoline would be raised 15
percent to Rp 1,150 per liter from the current price of Rp 1,000
per liter.

"But the price of kerosene for the poor and fuel for public
transportation and (state electricity firm) PLN will not
increase," he said following a closed-door meeting with the
budget committee.

He said the price of automotive diesel oil would increase to
Rp 600 per liter from Rp 550 per liter, industrial diesel to Rp
550 from Rp 500, kerosene to Rp 350 from Rp 280 and bunker oil to
Rp 400 per liter from Rp 350 per liter.

He said the average 12 percent increase in fuel prices would
mean a Rp 22.4 trillion fuel subsidy in the April-December 2000
state budget.

Separately, deputy chairman of the Golkar Party Agung Laksono
said that the party would reject the planned 12 percent increase
in fuel prices.

He said that Golkar would fight to maintain fuel price at
current levels.

It's also not clear on whether Finance Minister Bambang
Sudibyo had agreed to the 12 percent planned increase.

In its earlier state budget draft, the government proposed a
20 percent increase in fuel prices, which would have required a
Rp 18.3 trillion fuel subsidy.

But legislators demanded the government provide a larger
subsidy because they feared a 20 percent hike in fuel prices
could trigger social unrest given the current economic hardships
faced by most people.

The House team negotiating fuel prices earlier demanded a fuel
subsidy of more than Rp 24 trillion, which would have translated
into a 10 percent increase in fuel prices.

The legislators pressured the government to raise its oil
price budget assumption to US$20 per barrel from the $18 per
barrel in the original budget proposal. This increase
theoretically would allow the government to provide a larger fuel
subsidy.

But Bambang said the government and the budget committee
agreed part of the increased oil revenue should be distributed to
other sectors, including education and health.

Some economists have said the government should distribute
part of the added oil revenue to productive sectors such as
agriculture to generate employment and help revive the economy.

The economists also expressed concern the $20 per barrel oil
assumption was too risky, saying world oil prices could drop
below that level during the course of the nine-month state
budget. Oil prices currently are hovering at around $30 per
barrel.

Bambang said the government expected next month's OPEC meeting
would come up with a strategy to maintain oil prices at a
"favorable level", allowing the $20 per barrel oil price
assumption to be met.

Bambang also said the government would launch efforts to
improve the efficiency of state oil and gas firm Pertamina's oil
production.

He added that the government would also step up pressure to
fight the smuggling of fuel out of the country.

Separately, the deputy of the House budget committee, Abdullah
Zainie, said the distribution of subsidized fuel for public
transportation and kerosene for the poor would be arranged
through a coupon program.

He added that the technicalities of the plan still were being
discussed.

A number of people have expressed concern that distributing
subsidized fuel through such a program is open to abuse by
corrupt government officials.

Minister of Finance Bambang Sudibyo and the budget committee
are expected to finalize the state budget draft on Wednesday,
before the House approves it on Thursday.

The House initially was expected to approve the state budget
on Wednesday, but the debate between the government and the House
budget committee went longer than expected, mostly as a result of
the issue of the size of the fuel subsidy. (rei/rms)