Govt finally bows to public pressure and cuts fuel prices
Govt finally bows to public pressure and cuts fuel prices
The Jakarta Post, Jakarta
The government announced on Monday a reduction in fuel prices and
discounts for certain electricity users following weeks of
nationwide protests over the recent fuel and utility price hikes.
"The government today has set new prices for fuel to come into
effect on Jan. 21 at midnight," Coordinating Minister for the
Economy Dorodjatun Kuntjoro-Jakti told a press conference
following a cabinet meeting.
The price of automotive diesel is to be cut to Rp 1,650 per
liter from the previous price of Rp 1,890 per liter, while the
price of industrial diesel is reduced to Rp 1,650 from Rp 1,860.
The price of heavily subsidized kerosene for industrial use is
lowered slightly to Rp 1,800 from Rp 1,970.
The price of other fuel products, including premium gasoline
and kerosene for domestic, stay the same.
"The new price for domestic oil products will be effective as
long as world oil prices remain high," Dorodjatun said, pointing
to an apparently impending U.S. attack on Iraq, and the situation
in the Middle East and Venezuela as causes of uncertainty in the
international oil market.
As a result of the price cut for industrial diesel, which is
the primary source of energy used by state-owned electricity
company PLN, the utility company would provide a monthly 2.5
percent discount for its customers in the business and industrial
categories. The company would also provide incentives for
household customers with capacities of 900 VA to use energy-
saving light bulbs.
The government earlier this month decided to raise domestic
fuel prices by between 3 percent and 22 percent, electricity
prices by 6 percent every quarter, and telephone charges by an
average of 15 percent to reduce costly subsidies and help ailing
state-owned utilities.
But the simultaneous price increases angered both businesses,
workers and other people, triggering weeks of protest. Some have
even called on President Megawati Soekarnoputri and Vice
President Hamzah Haz to step down.
Ex-authoritarian president Soeharto was forced to step down in
1998 due to widespread protests and riots that were partly
triggered by an earlier fuel price hike decision.
The protests had prompted the government earlier to delay the
increases in phone charges.
A number of organizations plan to continue their
antigovernment protests despite the fuel price reductions, saying
that they wanted a clean government. President Megawati has been
strongly criticized over a decision to free former bank owners,
heavily indebted to the state, from the possibility of
prosecution for banking crimes committed in the past.
The country's international donors grouped in the Consultative
Group on Indonesia (CGI), which convenes for a two-day meeting on
Tuesday in the resort island of Bali to decide on fresh loans for
the country, may not be happy with the price cut decision. The
International Monetary Fund has long insisted the government
eliminate expensive subsidies on fuel and electricity to create a
sound fiscal management. Heavily subsidized fuel is seen as
benefiting rich car owners and big business.
Indeed, the reduction in the prices of industrial diesel and
electricity for industry seems to be a result of lobbying by the
influential business groups that have been protesting the early
January utility price hikes.
The government is trying to play down the impact of the new
policy on the 2003 state budget.
Dorodjatun said that although the cost of the price reductions
would be about Rp 1 trillion per month, it would not affect the
budget deficit target as the government had extra money from the
contingency fund, which was originally intended for emergencies.
The government would latter replenish the funds with the
windfall profits from oil sales after obtaining the approval of
the House of Representatives.