Govt raises fuel, electricity prices

JAKARTA (JP): The government increased yesterday fuel prices by between 25 percent and 71.43 percent and electricity tariffs by 20 percent to reduce subsidies and curb the state budget deficit.

The new prices are effective as of today.

Minister of Mines and Energy Kuntoro Mangkusubroto said yesterday the government had no choice but to increase fuel and electricity prices.

He said government revenues had been declining sharply during the economic slowdown while the costs of fuel and electricity had risen sharply due to the rupiah's steep depreciation.

"President Soeharto is fully aware that this measure will increase the economic hardships for the public but he asked for our full understanding and cooperation to make sacrifices in order to emerge from the current economic difficulties," he said after meeting with the President.

Kuntoro said the measures were still in line with social justice principles as better-off consumers would subsidize those on low incomes.

The price of kerosene, the fuel most widely used by low-income families, experienced the smallest increase of 25 percent to Rp 350 per liter. The price of gasoline increased by more than 71 percent to Rp 1,200.

Likewise, those who use small amounts of electricity will be subsidized by major users.

Jet fuel was raised to Rp 600 from Rp 420 per liter, automotive diesel oil to Rp 600 from Rp 380, industrial diesel oil to Rp 500 from Rp 360 and bunker oil to Rp 350 from Rp 240.

Following the price hike announcement, thousands of motorists lined up outside gas stations across the city to fill up their tanks before the new prices became effective at midnight.

Police were seen on guard at some stations to help ease traffic congestion which resulted in gridlock.

The last time the government raised fuel prices was in January 1993 and electricity tariffs increased in March.

The country is a net oil exporter but it subsidizes the domestic use of fuel since it still depends partly on imported fuels due to the limited capacity of the refineries owned by the state-owned oil and gas company Pertamina.

Kuntoro estimated national fuel consumption this year would reach 52 million kiloliters, about 12 million kiloliters of which are imported.

Pertamina imports about 70 million barrels of heavy crude oil annually for its refineries to produce fuel.

"The sharp depreciation of the rupiah against the dollar since mid-last year has raised the cost of crude oil and imported fuels," he said.

If the government did not increase the prices of both commodities, subsidies for them would reach Rp 27.5 trillion for the current fiscal year -- or about one fifth of the state revenues.

The price rises will reduce subsidies to Rp 6 trillion for fuel and to Rp 2.3 trillion for electricity in the current fiscal year, Kuntoro said.

"This will allow the government to allocate bigger subsidies for more vital commodities such as rice, soybean and medicines and to spend more on education," he said.

The minister said kerosene would take up Rp 4 trillion of the Rp 6 trillion allocated for fuel subsidies during the current fiscal year.

The remaining 30 percent of the fuel subsidy was mostly allocated for automotive diesel, he said.

The government raised electricity price by 20 percent to an average Rp 233.59 from Rp 194.74 per kilowatt hour (kwh) and will again raise the tariff by another 20 percent in August and again in November.

Kuntoro said the government allowed low-income households to apply for a special rate similar to that applied to nonprofit organizations to ease their burden.

The government set a flat monthly tariff of Rp 9,800 for low- income users with a monthly maximum use of 220 volt-ampere or 200 watts.

"The falling rupiah rate has steeply raised costs of electricity because the State Electricity Company buys its gas, geothermal and power from independent (private) suppliers in dollars," he said.

Gradual reduction of subsidies for fuel, electricity and other basic staples is part of the reform package agreed with the International Monetary Fund early last month. (jsk)

Table: Prices of fuels (per liter in rupiah)

(FUEL, NEW, OLD, % CHANGE): (Kerosene, 350, 280, 25); (Avtur, 600, 420, 42); (Avgas, 600, 420, 42); (Premium gasoline, 1,200, 700, 71); (Automotive diesel, 600, 380, 57); (Industrial diesel, 500, 350, 38); (Residue fuel, 350, 240, 45).