Government to review plan to hike fuel prices
JAKARTA (JP): The government said on Tuesday it would review its plan to hike fuel prices by an average 12 percent as of October this year, due to an expected windfall of Rp 11 trillion (US$1.3 billion) from oil exports.
Coordinating Minister for the Economy Rizal Ramli said he would meet with economics ministers on Wednesday to review the plan.
"We will look at various options available to reduce the gap in fuel prices in the local and international markets," Rizal said in a news gathering.
Director General of oil and gas at the Ministry of Energy and Mineral Resources Rachmat Sudibyo said the government needed to exercise various options before coming to a decision.
He confirmed that the meeting would also reevaluate the percentage of the fuel price increase and its schedule.
"We have to take into account the expected windfall in oil profit," he later told The Jakarta Post.
The government expects a windfall of Rp 11 trillion in its oil income, due to favorable international oil prices during this year's state budget.
Rachmat said the additional income might be used to help finance the current fuel subsidy spending.
However, he refused to provide any details on what exactly the meeting would discuss, saying he had to await its outcome.
"But if we don't raise fuel prices by October, there won't be a raise at all this year," he added.
He further said it was only normal that the government would discuss its plan to raise fuel prices, as the present Cabinet consisted of a new economic team.
The government initially planned to raise fuel prices on April 1, 2000, in a bid to cut subsidy spending to about Rp 18 trillion ($2.1 billion).
It plans to raise the price of Premium gasoline to Rp 1,150 from Rp 1,000 per liter, automotive diesel fuel to Rp 600 per liter from Rp 550 per liter, kerosene to Rp 350 from Rp 280 and bunker fuel to Rp 400 from Rp 350 per liter.
However, massive demonstrations against the price hikes led President Abdurrahman Wahid to postpone the plan until October this year.
The fuel price hike is part of an agreement with the International Monetary Fund (IMF), that requires the government to gradually lift subsidy spending.
Under a three-year economic program, Indonesia will receive $5 billion in financial aid from the IMF.
Rachmat hinted that the meeting would discuss preparations of related government ministries in the upcoming fuel price hike plan.
The government based its projection on a windfall from oil and gas exports on an average oil price of Rp 28 per barrel with the rupiah exchange rate of 8,200 to the U.S. dollar.
Under the current state budget assumptions, oil prices are pegged at $20 per barrel and the rupiah at 7,500 to the dollar.
Rachmat said the government would earn an additional Rp 3 trillion from oil exports for every one dollar increase in crude oil prices. But at the same time, the government has to increase spending on subsidies and oil imports by Rp 1.7 trillion. (bkm)