House delays decision on fuel subsidy

House delays decision on fuel subsidy

JAKARTA (JP): The House of Representatives state budget task
force delayed on Tuesday taking a crucial decision over the
government proposal to raise fuel prices by an average of 30
percent because officials from the state oil and gas company
Pertamina did not show up at the meeting between the task force
and the finance ministry.

Legislators also expressed disappointment because Minister of
Mineral Resources and Energy Purnomo Yusgiantoro, who has been
overseas for an OPEC meeting in Vienna, only sent expert staff
and not senior officials of the ministry.

Purnomo and Pertamina president Baihaki Hakim, who also
attended the OPEC meeting, should have accompanied Finance
Minister Prijadi Praptosuhardjo at the meeting with the House.

"We're disappointed with the absence of Pertamina. This is
contempt of parliament," said legislator Rizal Djalil at the
meeting, which had been running for more than two hours before
legislators found out that no Pertamina officials could be
reached to confirm technical data.

Legislators then agreed to hold another meeting on Tuesday
afternoon to come up with a final decision, but demanded that
both Pertamina and the ministry of mineral resources and energy
must send their key people.

The government has proposed to increase fuel prices by an
average of 30 percent in the middle of this month as part of
measures to cut state budget spending to help limit the 2001
budget deficit to a safer level of around 3.8 percent of gross
domestic product (GDP).

The current budget deficit could widen to a dangerous level of
6 percent of GDP due to the sharp plunge in the exchange rate of
the rupiah against the U.S. dollar and rising domestic interest
rates.

Raising fuel prices by cutting subsidies on the commodity is a
politically sensitive measure which must obtain the support of
the House to be implemented successfully.

The House state budget task force includes legislators from
various related commissions of the House.

Commission VIII on mining and energy, which has been tasked to
initiate a preliminary debate over the government proposal on the
fuel subsidy issue, has suggested that fuel prices be increased
by an average of around 27 percent by reducing this year's fuel
subsidy to around Rp 53.5 trillion compared to the government
proposal of Rp 60.8 trillion.

According to the commission's recommendation, the price of
premium gasoline should be raised by around 17 percent to Rp
1,350 per liter, kerosene increased by 14 percent to Rp 400 per
liter and automotive diesel fuel by 50 percent to Rp 900 per
liter.

"The price increase of the three components is equal to an
average increase of more than 27 percent," said a Commission VIII
legislator.

The legislator added that the price of industrial diesel was
proposed to be increased by 103 percent to Rp 1,115 per liter,
and bunker fuel by 106 percent to Rp 825 per liter.

The commission's recommendation is based on the assumption
that 2001 domestic fuel consumption is at around 51.8 million
liters.

The recommendation of the commission is subject to the
approval of the House state budget task force.

Some members of the task force, however, rejected the
recommendation made by the commission, saying that the fuel
consumption assumption was too high, which would translate into a
greater budget for fuel subsidy. (rei)