Govt to continue fuel subsidy for the poor

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana said yesterday the government would continue subsidizing fuels used by the poor to prevent them from suffering large price increases.

"We have been considering several schemes to raise fuel prices that would not cause much harm to the poor," Sudjana said at a hearing with the House of Representatives Commission V for mines and energy.

Sudjana said there would be significant price increases for fuel such as aviation turbine fuel, aviation gas, premium and industrial diesel.

Prices of kerosene and automotive diesel would also increase for industrial and commercial purposes, but they would remain low for the poor.

"We've been thinking, for instance, about adding a colorant to kerosene for the poor and leaving kerosene for industries colorless to differentiate between cheap and expensive kerosene," said Sudjana, adding that the poor uses 50 percent of the kerosene produced, while the industries use the rest.

The government would also set the price of automotive diesel high for private cars and private diesel machines, but keep the price low for public transportation, Sudjana said.

Sudjana said the government would increase fuel prices in the near future, but had not decided how soon that would be.

"It depends on the presidential decree," he said.

Minister of Finance Mar'ie Muhammad recently said at a hearing with the House that the government would increase fuel prices starting April and reduce the government subsidy, which was estimated at Rp 7.45 trillion (US$1.49 billion) for the 1998/1999 fiscal year.

The schedule was part of an agreement between the International Monetary Fund (IMF) and the government.

According to the agreement, the government would raise fuel prices to reduce fuel subsidies, except for prices of kerosene and diesel fuel, where increases would be kept to a minimum so as to protect the poor.

Indonesia is a crude oil exporting country, but has subsidized the domestic fuel market since it has to import 20 percent of the fuel consumed domestically due to the limited capacity of state oil and gas company Pertamina's refineries.

Fuel demand stands at 51 million kiloliters annually.

The largest amounts of imported fuels are for kerosene and automotive diesel, whose imports reached 2.7 million kiloliters and 5.5 million kiloliters respectively in the 1996/1997 fiscal year.

Kerosene imports are projected to reach 1.5 million kiloliters in the 1997/1998 fiscal year, while automotive diesel will reach 7.1 million kiloliters the same year.

Sudjana said Pertamina sold kerosene for Rp 280 per liter domestically, as against the import price of Rp 1,300. Automotive diesel costs at Rp 380, compared with its import price of Rp 1,030. (jsk)