Govt set to raise fuel, electricity prices soon
Govt set to raise fuel, electricity prices soon
JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto confirmed yesterday the government would soon
increase fuel and electricity prices to cut the government's
large subsidies.
He said he had sent President Soeharto the proposals for price
rises for both commodities and believed the President would
approve the proposals soon.
"We are waiting for the President's approval for the price
rises. I think the signal will come soon," he said on the
sidelines of a seminar titled The Deregulation of the Electricity
Sector organized by the Foundation of the Indonesian Institute
for Energy Economics.
He said the government had no choice but to hike fuel and
electricity prices soon since government revenues were declining
sharply due to the economic slowdown while the costs of supplying
fuel and generating electricity were rising sharply as a result
of the rupiah's steep depreciation.
"The monetary crisis which has beset the country since last
July has greatly depleted the government's resources.
"We'd do better to spend our limited funds on drugs, food and
education rather than on fuel and electricity subsidies," Kuntoro
said.
The minister added, however, that the fuel and electricity
subsidies would be decreased gradually so as not to adversely
affect people's economic activities.
Under the revised state budget for 1998/1999 that came into
effect at the beginning of this month, the government plans to
reduce fuel subsidies to Rp 7.453 trillion (US$1.49 billion) from
the original projection of Rp 10.07 trillion.
Pertamina said yesterday its production costs for kerosene and
automotive diesel fuel were Rp 1,000 per liter on the basis of an
exchange rate of Rp 8,000 per dollar. Their sale prices are
currently Rp 280 and Rp 380 per liter respectively.
Analysts predict the highest price rise will most likely be
imposed on gasoline (premium) which at present sells for Rp 700
(8.75 U.S. cents) per liter.
In the 1996/1997 fiscal year the country used 9.9 million
kiloliters of kerosene and 19.6 million kiloliters of automotive
diesel oil.
Kuntoro added that the planned price rises were in compliance
with the recent agreement on economic reforms between the
government and the International Monetary Fund (IMF).
The agreement stipulates that the government will increase
domestic fuel and electricity prices in the fiscal year
1998/1999.
The smallest increase will be imposed on kerosene, the most
widely used cooking fuel. Households with a monthly electricity
usage of up to 250 kilowatt hours will also be spared tariff
increases.
Former Mines and Energy Minister Mohammad Sadli and Mari
Pangestu, an economist at the Centre for Strategic and
International Studies, said during the seminar that they fully
supported any government move to raise fuel and electricity
prices.
"Higher fuel and electricity prices will surely increase the
economic hardships of people. But if we delay raising the prices
the country may suffer from hyperinflation of 100 percent to 200
percent," Sadli warned.
Mari supported the idea of gradually phasing out the fuel and
electricity subsidies. But, Sadli suggested a bold step to stop
the subsidies once and for fall.
"We'd be better off suffering one very painful beating than a
series of milder blows," Sadli said. (jsk)