Govt told to seek options other than raising fuel prices
Govt told to seek options other than raising fuel prices
Leony Aurora, The Jakarta Post, Jakarta
The government has other options other than hiking domestic fuel
prices to ease pressure on the state budget, a group of
economists say, namely by requiring local administrations to
shoulder some of the fuel subsidy and reforming the oil and gas
trade regime.
Indonesia Awakens, told a press conference on Monday that
raising fuel prices was not the only way to cope with the
widening state budget deficit, as the soaring global oil prices
actually put the country's oil and gas balance in surplus.
Revenue from the sector will rise to Rp 213 trillion (US$21.73
billion) from Rp 129 trillion as the price of oil increases to
$60 a barrel from $40, a study by the team shows. Government
spending on the fuel subsidy will rise as well to Rp 129 trillion
from Rp 59 trillion at current prices.
"There is a Rp 14 trillion difference between the additional
oil and gas revenue and additional subsidy spending," Econit's
economist Hendri Saparini said.
The deficit in the budget however, will still widen because
local administrations get more revenue as prices rise.
Law No. 25/1999 on fiscal balance between the central and
local administrations stipulates that after taxes, the two
parties will get a share of 85 percent and 15 percent,
respectively, of oil revenue and 70 percent and 30 percent of gas
sales.
The team's calculations show that local governments will get
Rp 36.7 trillion if oil stays at $60 per barrel, up from Rp 24.7
trillion with oil at $45 a barrel, as set in the revised state
budget for 2005.
The team also urged the government to investigate and reform
the country's oil and gas trade regime before resorting to a
price hike. It quoted data from the Ministry of Energy and
Mineral Resources, which shows that, of the 60.6 million
kiloliters of fuel procured in 2003, only 52.4 million kl reached
industries and the people.
"About 13.5 percent of the fuel was "lost" in the distribution
and transmission process," Hendri said.
The team also questioned why a third of the 368,700 barrels of
crude oil imported daily, or 128,700 barrels, are purchased in
the spot market. The rest is bought on long term contracts.
"The spot market can be a corruption source as the prices
fluctuate. Why not look for more contracts? Indonesia needs it in
the long run anyway," Hendri said.
The government is mulling the possibility of increasing the
prices of domestic subsidized fuel -- premium gasoline, diesel
fuel, and kerosene -- to ease the burden on the state budget.
Fuel prices were raised by an average of 29 percent in March.
"The middle and lower-income groups' purchasing power cannot
withstand another hike," said Dradjad.
The supposed redistribution of the subsidy to the poor through
the low-income assistance program had not proved to be efficient,
he added.