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)