Govt intervention still needed to curb price hike
JAKARTA (JP): The government's market intervention is still needed to anticipate a possible sharp increase in prices in the next few months, economic analysts have said.
Tadjuddin Noor Said, a noted economic analyst and former legislator, said yesterday the rise in fuel prices starting April would lead to a sharp increase in food prices and other essentials.
Without the government's intervention, the price increase would become uncontrollable, he said. Therefore the government's intervention was still needed even though the State Logistics Agency (Bulog), as the buffer stock agency, had lost its monopolistic privileges.
Bulog will only hold its monopoly on the import of rice beginning next fiscal year. As the consequency, it will no longer operate as the buffer stock agency to stabilize other important products such as sugar and cooking oil.
A member of the United Development Party (PPP) faction in the House of Representatives (DPR), Muchsin Bafadal, told The Jakarta Post the increase in fuel prices would worsen the economic crisis and sociopolitical situation unless the government was able to control food prices.
The government should anticipate an increase in food prices after fuel prices start to increase beginning April 1, the legislator said.
"I am really worried about what will happen if the government fails to control food prices after the fuel price hike," Muchsin said.
Tadjuddin said the government should intervene in the market to control food prices for the benefit of the public.
"That kind of intervention is line with Chapter 33 of the Constitution which stipulates that things which concern the majority of the public should be controlled by the government," Tadjuddin said.
Minister of Finance Mar'ie Muhammad said yesterday in his speech on the revised 1998/1999 state budget at the House of Representatives that the government would raise fuel prices starting April as it reduced fuel subsidies by between 30 percent to 40 percent to Rp 7.45 trillion (US$1.49 billion) from Rp 10.07 trillion projected in the initial draft state budget.
The state budget has been revised as part of the accord between the International Monetary Fund (IMF) and the Indonesian government.
The IMF and the Indonesian government agreed to raise fuel prices to reduce fuel subsidies, except for the price of kerosene and diesel fuel, where increases would be kept to a minimum so as to protect the poor.
Tadjuddin said the Indonesian government should not blindly follow the IMF's requests to abolish subsidies and to stop intervention in the market.
"The IMF is only a way and not an end," Tadjuddin said, adding that government intervention in the market was still needed otherwise the market would be controlled by a small number of wealthy people.
Tadjuddin said the decrease in fuel subsidies projected for next fiscal year would result in an increase in fuel prices by between 30 percent and 40 percent.
He believed the government would apply a cross-subsidy scheme where the price of avtur, avgas, and premium gasoline -- which were mainly used by wealthy people -- would be increased more than the price of kerosene and diesel fuel -- which were mainly used by poor people, industries and public transportation.
He projected the government would raise the price of avtur, avgas and premium gasoline by more than 50 percent, while kerosene and diesel fuel by 10 percent.
The price of avtur and avgas is now Rp 420 per liter domestically, premium gasoline Rp 700 per liter, kerosene Rp 280 per liter, and diesel fuel Rp 240 per liter. (jsk)