Govt weighs options for cutting fuel subsidy
Govt weighs options for cutting fuel subsidy
JAKARTA (JP): The Ministry of Mines and Energy has prepared
several alternative schemes for President Soeharto to choose in
reducing the subsidy on domestic fuel sales, its secretary-
general has said.
Darmoko Slamet refused to reveal the schemes, but said Friday
that one was an automatic fuel price adjustment similar to the
scheme applied for electricity.
"It's not right to reveal all the alternative schemes right
now, because the government has yet to make its choice of them."
Several experts have raised the automatic fuel price
adjustment idea, including economist and former cabinet minister
Subroto.
He proposed that fuel prices be regularly adjusted on the
basis of several variables, including the country's inflation
rate, the change in the rupiah's value to the U.S. dollar and
international oil prices.
As comparison, electricity tariffs of state-owned electricity
company PLN are adjusted every three months on the basis of
several variables, among them the national inflation rate, the
change in the rupiah's value to the U.S. dollar and the price of
fuel for power generation.
The government is expected to raise fuel prices in April to
offset its plan to reduce subsidies on fuel sales in the domestic
market.
The oil subsidy recently returned to the spotlight following
the agreement between the International Monetary Fund (IMF) and
the government.
Under the 50-point agreement signed here Thursday by IMF
managing director Michel Camdessus and President Soeharto,
Indonesia agreed to gradually adjust fuel prices to
international prices starting from April 1, except for prices of
kerosene and diesel fuel.
Increases of these will be kept to a minimum in the interest
of the poor.
Soeharto had earlier said the government oil subsidy would
reache Rp 10.1 trillion (US$2.5 billion) for the fiscal year
1998/1999 if current fuel prices remained constant.
Soegianto, the president of the state-owned oil and gas
company, Pertamina -- the country's sole fuel distributor,
importer and producer -- said Friday the company would support
any decision made by the government.
He said a decision would not have any impact on Pertamina's
financial performance because it was required to present to the
government the "margin" it got from fuel operations, but would be
compensated for any "losses".
Under the state budget, the margin is called fuel net profit,
and the loss is called fuel subsidy.
"Fuel operation is a zero profit growth for Pertamina,"
Soegianto said.
The country's annual consumption of fuel reaches 52 million
kiloliters of fuel annually, according to Pertamina data, only 80
percent of which can be supplied by Pertamina's refineries.
Twenty percent of the fuel is imported from Southeast Asian
countries, like Singapore and Thailand, and the Middle East.
Pertamina conducts imports through its affiliates: Pacific
Petroleum & Trad Co. Ltd, Perta Oil Marketing Ltd and Permindo
Trading Oil Co. Ltd.
The government last raised fuel prices in 1993 under a
presidential decree.
This set the price of avgas at Rp 420, avtur Rp 420, super
gasoline Rp 840, premium gasoline Rp 700, kerosene Rp 280,
automotive diesel oil Rp 380, industrial diesel oil Rp 240 and
marine fuel oil Rp 240. (jsk)