Govt asked to time oil price hike

The Jakarta Post, Jakarta

Bank Indonesia is asking the government to carefully consider the timing of its plan to raise domestic fuel prices next year, so as to keep its effect on the country's inflation rate within manageable limits.

"I agree with recent suggestions that the hike be done during harvest time," the central bank's deputy governor Hartadi Sarwono said on Friday.

"It would also be better if the government decided to raise fuel prices when the rupiah exchange rate was at a better level."

Hartadi explained that if the hike was done during the harvest time, then a lower price of staple food items during that time could counterbalance a possible rise in the prices of other goods affected by the fuel price hike.

A stronger local unit, meanwhile, would mean that the price of imported goods could be maintained, averaging out inflation as well. The rupiah, however, weakened 0.4 percent to Rp 9,066 per dollar on Friday.

"Pressure on inflation could further be relaxed if the government could ensure the distribution of goods, particularly of staple needs. The problem is that many producers and distributors tend to raise their prices whenever a fuel price hike occurs, even when it doesn't have anything to do with their cost of production," Hartadi said.

"The government should also properly channel fuel subsidy funds it will save from the hike for health, educational, and infrastructure development purposes."

Hartadi added that the central bank would not be too hasty in making any monetary policies, such as adjusting its SBI benchmark interest rate, to counter a possible rise in the inflation.

"As long as core inflation maintains its current stable trend, then we see no need for such an intervention," he said.

The core inflation rate is the underlying inflation rate of a country's economy, excluding volatile energy and food prices.

The Central Statistics Agency earlier this month reported a year-on-year inflation rate of 6.18 percent as of November. The government has set its inflation target at 7.0 percent for this year, and at 5.5 percent for 2005.

Meanwhile, Coordinating Minister for the Economy Aburizal affirmed that the government would raise fuel prices in the first quarter of next year, sometime during harvest time.

"But we are still working out the available options and we'll consult with the House of Representatives, because what is good for the state (budget) is not necessarily good for the people," he said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said there were five options now being considered by the government: First, raising prices only for industrial diesel oil, bunker oil and Premium gasoline; second, raising prices only for bunker oil and industrial diesel oil; third, raising prices only for Premium gasoline; fourth, raising prices for oil automotive diesel oil for transportation sector; fifth, raising prices only for automotive diesel oil and kerosene.

The government will carefully study the options, before making a decision, he said.

Elsewhere, the Indonesian Consumer Foundation demanded that the government publicize the evaluation of last year's fuel price hike before acting to raise them again.

"This is not about us agreeing with (the planned fuel hike) or not, but if the government wants to hike prices, it must not burden the poor too much," YLKI chairperson Indah Suksmaningsih said.

"And to keep matters transparent, the government must first share with the public the results of the last fuel hike, on whether it had burdened poor people or not."

Furthermore, the government has to familiarize the public with the hike plan to avoid possible resistance and inform the public to what extent the plan would affect their lives, Indah added.

"I also urge the public to talk to the government on how the hike affects them, because honestly, they are the ones who will carry more burden than the rich people or the decision makers themselves," she said.