Govt planning to remove all fuel subsidies
Govt planning to remove all fuel subsidies
Adianto P. Simamora, The Jakarta Post, Jakarta
The government said on Wednesday that due to continuing
budgetary constraints it planned to entirely remove fuel
subsidies and to raise power prices by an average of 6 percent
every quarter starting next year.
The plan would raise the maximum prices of fuel sold at gas
stations from the current 75 percent to 100 percent of
international market prices.
"We'll reduce fuel subsidy spending next year to Rp 15.87
trillion (about US$1.74 billion), or down 52 percent from this
year's spending of Rp 30.5 trillion," Minister of Energy and
Mineral Resources Purnomo Yusgiantoro told the House of
Representatives' Commission VIII on energy affairs during a
hearing.
Exempted from the new pricing policy is kerosene for household
use -- currently sold at Rp 600 a liter and which the government
plans to subsidize until 2004.
The new pricing scheme requires the House's approval.
Fuel pricing policy is seen as a politically sensitive issue
as consumers here have long been accustomed to generous
subsidies.
But since the 1997 economic crisis, the government's priority
has shifted to paying off its debts, forcing it to gradually
eliminate fuel subsidy spending from the state budget.
To avoid recurrent violent protests every time it plans to
hike fuel prices, the government has pegged them to world market
prices since January of this year.
State-owned oil and gas company Pertamina, which purchases and
distributes fuel, announces monthly price adjustments based on
the Mid Oil Platt Singapore (MOPS) average price movement.
Purnomo added that subsidies on electricity would also be
reduced with an average 6 percent increase in power charges every
quarter starting next year.
The planned increases in fuel and power prices drew immediate
criticism from the Indonesian Consumers' Foundation (YLKI).
"The government seems to forget that our local purchasing
power is far lower than that in other countries," YLKI executive
Muhammad Iksan said while urging the government to delay the
plan.
Lili Asdjudirejo, executive director of the Indonesian Textile
Association (API) agreed, adding that the rise in energy costs
would undermine the ability of local producers to compete with
imported textile products.
"We hope our government will make the right decision and
consider the fate of local industry," he said, explaining that
local producers were already burdened by various unnecessary and
often illegal charges.
The labor intensive textile industry is among the worst hit by
the economic crisis and a gloomy global export market has now
further eroded the chances of a recovery.
Djimanto, the secretary-general of the Indonesian Footwear
Association (Aprisindo), suggested that the government consider
the woes of domestic industry and postpone the fuel price hikes.
"We agree to the plans for subsidy cuts. However, next year
isn't the right time as many local firms are still suffering
heavy losses," he argued.