Govt cuts fuel prices after tragic rioting

Govt cuts fuel prices after tragic rioting

JAKARTA (JP): The government announced a cut in fuel prices
and electricity tariffs yesterday, effective from today, after
recent increases were blamed for igniting riots in the capital
and several other cities.

Minister of Mines and Energy Kuntoro Mangkusubroto, announcing
the cuts at the House of Representatives (DPR), said the
government would reduce the price of premium gasoline to Rp 1,000
per liter (about 8.5 US cents) from the current level of Rp
1,200.

Before the government raised prices on May 5, premium sold for
Rp 700 per liter.

The minister also said the price of automotive diesel would be
cut to Rp 550 per liter from Rp 600. Before the recent price
increase it sold for Rp 380 per liter.

The price of kerosene, which is widely used for household
fuel, would be returned to the pre-May 5 price of Rp 280 per
liter. It had been raised to Rp 350 per liter.

Kuntoro also said the government would reduce increases
scheduled for August and November to 18 percent. Initial plans
were to increase tariffs by 20 percent on each occasion.

The increases in fuel and electricity prices were brought
about through presidential decrees, so the cuts would require the
same backing, Kuntoro said.

"I apologize if the cuts are not as much as people had hoped
for, but it is the best we can do.

"I hope these small cuts can significantly reduce the burden
on peoples' lives," Kuntoro said at a joint working session with
House Commission V on mines, energy, industry and trade, and
House Commission VII on budget and finance.

Kuntoro was joined by Minister of Finance Fuad Bawazier at
yesterday's session.

Fuad said the cuts would cost the government an extra Rp 2
trillion in budgetary funds, bringing total expenditure on fuel
and electricity price subsidies to Rp 9.5 trillion in this
financial year.

Due to limited sources of domestic funds, Fuad said, the extra
subsidies would be financed by foreign loans.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said yesterday that he had consulted with
the International Monetary Fund (IMF) Managing Director Michel
Camdessus on the decision to lower prices of fuel and
electricity, and that the IMF man had been sympathetic to the
need for such a move amid the increasing hardship in society.

"I talked with Mr Camdessus by telephone today," he told
reporters at a media conference yesterday evening.

He added the move did not violate the agreement with the IMF
because it stated clearly that subsidies would be abolished
gradually.

At a session involving Kuntoro and House Commission V last
week, all four factions in the House rejected the move to
increase fuel and electricity prices and asked the government to
rethink the decision.

In contrast to last week's session, yesterday's session lacked
heated debate and lively discussion.

The factions took turns to read out their opinions on fuel and
electricity prices then reached agreement after a placid one hour
lobby.

All factions called on the government to review or reverse the
fuel and electricity price increases, saying they had aggravated
public difficulties.

They also regretted the fact that the government had not
consulted the House of Representatives (DPR) before deciding on
the increases.

Nicolaus Daryanto of the Indonesian Democratic Party (PDI)
faction and Sudirman of the Armed Forces faction said in speeches
that there were indications the decision was taken under pressure
from the International Monetary Fund (IMF).

"The IMF probably did not anticipate the high social costs of
the change because it tends to concentrate on economic effects
alone," Sudirman said. (jsk/rid/rei)