Higher fuel prices set for export firms

JAKARTA (JP): The government will require export oriented companies, large industrial users, shipping and fishing companies to pay fuel at international prices, which are more than three times as high as domestic prices at present.

This pricing scheme will likely be introduced in April parallel with the government's plan to raise domestic fuel prices by an average 20 percent for general consumers, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday.

However, Purnomo told the House of Representatives, the government was still undecided over the April target, and might delay issuing the presidential decree on the fuel price hike.

"Based on the results of a cabinet meeting on February 8, plans to increase fuel prices must consider the social, economical and political dynamics of this nation," Purnomo added.

The 2001 state budget, which allocates Rp 41.3 trillion for fuel subsidies, has assumed that fuel prices will increase by an average 20 percent in April.

Purnomo said that the decree might introduce three kinds of prices.

"The first tier-price scheme will set fuel price increases of an average of 20 percent (general users), the second scheme will raise fuel prices to the international levels for certain industrial consumers and the third will set prices at Pertamina's cost price," he said.

Export firms, large industrial users, shipping and fishing companies (bunker services) must purchase fuel at international market prices, he said.

But Purnomo did not specify who would be the target users of the fuel which will be sold at Pertamina's cost price.

State oil and gas company Pertamina, which produces fuel for domestic use, has still to import to meet national consumption.

Most industrial users consume diesel oil to generate electricity, or use it as fuel for ships.

In the U.S., for example, the retail price of diesel oil is about $1.5 cents per gallon, or around Rp 4,000 a liter, as compared to the local subsidized price of Rp 600 per liter. In Singapore diesel oil is sold at the equivalent of Rp 2,000 per liter.

Currently some foreign mining companies in Indonesia already purchase fuel at international prices.

Purnomo said that the government had met several industrial associations to consult them about the fuel price increase.

The associations of the fishing and textile industries had earlier criticized the policy as a threat to their businesses.

Pertamina last year issued directives to various industries instructing them to buy fuel at international prices.

But strong protests from the industries prompted the government to backtrack and delay the plan.

Last month, Pertamina again urged the government to remove the fuel subsidy on major industrial users.

According to the company, the government could save up to Rp 9 trillion (about US$947 million) in fuel subsidy spending each year, if it forced these industries to buy fuel at international prices.

However, the government may delay the plan a second time from its original schedule in April as such an unpopular measure might add political pressure to embattled President Abdurrahman Wahid.

A fuel price hike in early 1998 had been one of the triggers of the May riots which led to the resignation of then president Soeharto.

Although Finance Minister Prijadi Praptosuhardjo has insisted that fuel prices must go up, the schedule over the hike is undecided.

The government postponed last year's fuel price hike from April to October, due to mounting public protests.

Purnomo said that all technical details of the fuel price hike had been completed, and timing was now the only consideration.

He said earlier that a more definitive timing awaited a meeting with the Coordinating Minister of Social and Security Affairs.(bkm)