Govt will not raise fuel price this year, says Sudjana
JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana said over the weekend that the government would not raise oil fuel prices despite the fact that the expected higher prices of crude oil would push up fuel production costs.
"The surplus we gain from selling our crude oil in the world market will still be able to offset the subsidy needed to maintain fuel prices at the present level," Sudjana said in Medan, North Sumatra.
He estimated that the government's revenues from oil exports would exceed the target set in the state budget as a result of higher crude prices in the international market.
The government's revenues from oil and gas exports are expected to reach Rp 14.87 trillion in the 1997/1998 fiscal year, up from Rp 14.12 trillion in 1996/1997. The state revenues from oil in the two fiscal years are calculated on an assuming price of US$16.5 per barrel.
Currently, the price of Indonesian crude oil on the world market is around $19.5 per barrel or $3 higher than the government's assuming price of $16.5 in the state budget.
Every increase of $1 will raise the government's tax revenues from crude oil exports by Rp1.4 trillion.
"If the crude oil price remains at $19.5 per barrel, the government's additional revenues from oil exports will reach Rp4.2 trillion," the minister said.
The increase in crude oil prices would, however, push up the production cost of fuel as Indonesia imports part of the crude oil feedstocks for its refineries and still imports a significant amount of oil fuels.
Every increase of US$1 in the price of crude oil will, for example, force the government to spend around Rp 667 billion as a subsidy to keep the fuel price at current levels.
At the price of US$19.5, the oil subsidy will amount to at least Rp 2 trillion per year.
The government apparently has anticipated higher oil prices in the international market, as can be seen in the sharp decrease in the estimated profits from domestic oil fuel sales in the coming fiscal year.
The 1997/1998 budget plan estimates profits from domestic fuel sales at only Rp 249.2 billion, down 70 percent from the Rp 827.8 billion expected in the current fiscal year.
Sudjana said another reason the government decided not to raise the fuel price was to keep inflation as low as possible.
"We don't want to push up inflation," he was quoted by Antara as saying. "Furthermore, raising the oil price is not popular," he said.
The government would spend Rp 2 trillion ($847 million) subsidizing domestic oil fuel this fiscal year owing to the increase in international crude oil prices, state-owned oil company Pertamina said recently.
Company finance director Soegianto said the average crude oil price on the international market reached $19.15 a barrel in the first semester (April-September) of the 1996/1997 fiscal year.
Indonesia has six refineries -- in Pangkalan Brandan, Dumai and Plaju in Sumatra; Cilacap and Balongan in Java; and Balikpapan in East Kalimantan -- with a total processing capacity of 982,500 barrels per day. All the refineries are owned by Pertamina. (bnt/vin)