Govt raises fuel prices by an average of 12 percent

JAKARTA (JP): The government on Saturday raised fuel prices by an average of 12 percent to help offset soaring oil prices in international markets. The new prices are effective as of Sunday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said raising fuel prices was a hard decision but the government did not have many choices other than to take the measure in a bid to cut the large subsidies for domestic fuel sales.

The price of premium gasoline was increased by 15 percent to Rp 1,150 (about 13.5 U.S. cents) from Rp 1,000, automotive diesel by 9 percent to Rp 600 from Rp 550, industrial diesel by 10 percent to Rp 550 from Rp 500, kerosene by 25 percent to Rp 350 from Rp 280 and bunker fuel by 14 percent from Rp 350 to Rp 400.

"The plan to raise fuel prices by an average of 12 percent has already been approved by the House of Representatives with the enactment of the budget for fiscal 2000," Purnomo told a press conference.

Purnomo said that with the price increases, the government would be able to reduce fuel subsidy expenditure to about Rp 800 billion (US$90 million) for the remaining three months of this fiscal year.

He said the Rp 800 billion to be saved as a result of the price hike would be used to help the poor cope with the impact of the increases. Of the said Rp 800 billion, Rp 350 billion would be used as capital for small businesses, Rp 250 billion would be spent on infrastructure developments and the remaining Rp 200 billion would go as cash aid to the poor.

Coordinating Minister for the Economy Rizal Ramli said he expected that the prices of basic commodities would rise by between 1.2 percent and 3 percent because of the fuel price hike.

"We expect inflation to increase by 2 percent to 3 percent and inflation this year might reach 8 percent," he added.

Director General for oil and gas Rachmat Sudibyo said that with the old fuel prices, the government would have to fork out Rp 44 trillion in fuel subsidies this year.

The budget for fiscal 2000 at first assumed fuel subsidies of around Rp 18 trillion with crude oil prices of $20 per barrel and an exchange rate of Rp 7,500 to the U.S. dollar.

House of Representatives speaker Akbar Tanjung and the deputy speaker of the People's Consultative Assembly, Husni Thamrin, said that they would ask the government to review the price hike if it caused a steep increase in the prices of basic commodities.

In general, the overall situation across the country, including in the capital Jakarta, on Saturday ahead of the planned fuel hike remained calm and the expected long lines of motorists queueing for fuel at gas stations were scarcely in evidence.

In Greater Jakarta, a long line was seen only at a gas station in the Lippo Karawaci complex in Tangerang.

Owners of fuel kiosks, which can be found on many roadsides across the country, said they had hoarded large stocks of fuel and kerosene in their efforts to earn extra profits in the first days of the new pricing regime.

"We're ready to serve customers at the new prices with the fuel we bought a few days ago," Mardio, a trader in Ungaran, Semarang regency, said.

In Salatiga, Central Java; Palembang, South Sumatra and Jambi, there were no signs of people rushing to gas stations for fuel on the last day of the old prices.

"But there were more people coming here than usual, filling their tanks right up," said a gas station worker in Jambi, as quoted by Antara.

Meanwhile, gas stations in Pekanbaru, Riau and Mataram, West Nusa Tenggara were swamped by motorists wishing to take advantage of the last hours of the old prices.

Retail fuel vendors were also seen among the people queuing at gas stations, bringing their jerrycans.

In Denpasar, Bali, some owners of hardware stores were taking advantage of the situation by increasing the prices of their goods.

In Kupang, East Nusa Tenggara, Governor Piet Tallo has decided to increase public transportation fares here starting Sunday.

Like in many other places across the country, local police were also ordered to prepare for any possible unrest that might arise due to the hike in fuel and transportation prices.

In several spots in Palu, Central Sulawesi, Medan, North Sumatra and Makassar, South Sulawesi, protests against the price hikes were still continuing on Saturday.

In Medan, students rallied on the streets, calling out that the people should reject the price hikes and asking them to rally on the streets on Monday.

In Yogyakarta, the lines of motorists at major gas stations were much fewer compared to the regular lines on Sunday evenings. (bkm/44/25/09/lup/bsr)