Govt hints fuel price increase might be necessary next year
Zakki P. Hakim, The Jakarta Post/Jakarta
Responding to the recent fuel shortage in some areas of the country and increasing oil prices in the world markets, Vice President Jusuf Kalla has hinted the government will have to reduce the fuel subsidy next year if it wants the economy to progress.
"Our best option is to do a price (assumption) adjustment, which is not a popular move. But it would be even more unpopular if we burned the subsidy (money) on the streets," he said in his speech opening the 13th Gaikindo Auto Expo at the Jakarta Convention Center on Friday.
Kalla said global oil prices -- which have already hit US$61 a barrel -- would force the government to spend as much as Rp 135 trillion (US$13.79 billion) this year on the fuel subsidy, with half of it going on the transportation sector.
"As a country, which is still considerably poor, we can't provide a subsidy of Rp 135 trillion for this one commodity," he said.
The government has allocated a fuel subsidy worth Rp 76.5 trillion, on the assumption that oil prices average $45 a barrel and annual fuel consumption reaches 59.6 million kiloliters.
He said Indonesia had become the biggest socialist country in the world through disbursing 27 percent of its state budget to subsidize a commodity.
"Assuming oil prices continue to rise -- and car sales and the U.S. dollar strengthen further -- we might have to pay a fuel subsidy of Rp 200 trillion next year, or about 30 percent of our state budget if it stood at Rp 600 trillion, without a price adjustment," he said.
Kalla said such a condition would hamper the economy and prevent the government from developing infrastructure such as roads, schools and hospitals.
He said it would be awkward for owners of Mercedes-Benz, Volvo, BMW, Toyota Crown and other premium brand cars to enjoy the subsidized premium gasoline.
"You may feel it's convenient to purchase fuel at a low price. But if the people cannot eat, they will throw (things) at your cars," he said.
Premium cars, however, require the higher quality fuel Pertamax Plus to maintain their engines.
Nevertheless, Kalla said reducing car production was not the solution and measures to reduce fuel consumption should be promoted.
His call met with the auto expo's emphasis this year on environmentally friendly technology.
Several carmakers at the expo are displaying their latest innovations featuring alternative energy, namely the Mercedes- Benz A-Class F-Cell, Honda FCX-V4 and Toyota Fine-S and Prius cutaway engine.
Association of Indonesian Automakers (Gaikindo) chairman Bambang Trisulo urged the government to look into the possibility of alternative energy sources straightaway.
"We're the only country in the ASEAN region that is yet to decide whether we will use gas, palm oil or gas-alcohol (gasohol) as an alternative fuel. It's time to speed up the use of alternative fuel," he said.
He pointed to the lack of infrastructure, such as refilling stations, as a factor that could prevent the use of alternative fuels for Indonesian-produced cars.
"Even in Cambodia, where the infrastructure is worse than ours, they have already decided to use gas. Why can't we?" he said. (006)
More stories on Page 17