Govt raises fuel, electricity prices

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).