House demands fuel price hike review

House demands fuel price hike review

JAKARTA (JP): The House of Representatives demanded yesterday
that the government review the May 5 increases in the prices of
fuel and electricity, calling the measures completely insensitive
to the people already suffering enormously because of the
economic crisis.

Members of House Commission V for industry and trade, mines
and energy told a packed working session with Minister of Mines
and Energy Kuntoro Mankusubroto that the price increases were not
only ill-timed but also legally suspect because they had been
effected without going through proper procedures.

"While the government has pumped Rp 107 trillion (US$11
billion) into subsidized liquidity credits to bail out ailing
banks, it is not willing to spend only Rp 16 trillion in fuel
subsidies for the majority of the people," Hamzah Haz, Chairman
of the Moslem-oriented United Development Party faction said.

The increases of between 25 percent and 71.43 percent in fuel
prices and 20 percent in electricity tariffs came into effect on
Tuesday through two Presidential decrees. They set off steep
rises of up to 60 percent in transportation fares which will
certainly trigger price rises of almost all products.

The House members, who usually are pliant and simply approve
whatever measures are implemented by the government, seemed
defiant and excessively critical yesterday.

Even members from the ruling Golkar party came out strongly
against the policy, demanding the revocation of the Presidential
decrees which effected the price rises.

About 35 of the 63 commission members raised their hands when
the chairman of the meeting opened the session for questions. The
meeting, which started at 9 a.m. continued until 11 p.m..

Priyo Budi Santoso of Golkar went as far as challenging the
whole cabinet, especially Kuntoro, to resign if they could not
get the price increases retracted.

"We had warned Kuntoro to be extra careful about the timing of
any decision to raise fuel prices and to consult with the House
before taking such a decision," deputy chairman of the Golkar
faction, Slamet Effendy Yusuf, said.

Kuntoro, looking subdued and sad, explained the economic
reasons behind the price increase, citing the more-than-70-
percent depreciation of the rupiah since July as the primary
factor.

He conceded it was the best of several bad alternatives the
government had had in order to cope with the severe financial
distress of PT Pertamina and PT PLN and to protect the state
budget from an exploding deficit.

"It was inevitable. I should apologize if the honorable House
members feel slighted by this measure and the manner in which it
was taken. But it has never been my intention to disregard the
House," Kuntoro told the meeting.

Kuntoro is one of the few recruits to the new cabinet
appointed last March who has gained high respect from the public
for his integrity and technical competence.

The legislators blamed what they saw as gross inefficiency
within the state oil and gas company Pertamina and state
electricity company, PLN, for the rises.

Another Golkar member, Samsudin Abbas, said the price
increases were made through a decision which was legally flawed.
The government should have consulted with the House first, as a
high state body which represents the rights of the people.

Golkar's Priyo Budi Santoso earned applause from spectators
when he called on the minister to step down if he failed to have
the price increases retracted.

"If the price increases are not annulled, I think we shall
never be able to ease the pains of the people any longer. I
therefore propose that either I and other House members or the
whole cabinet resign," Priyo said.

A heated debate ensued when Priyo questioned Pertamina's
efficiency in importing fuel products and crude oil and alleged
that its subsidiaries had marked up the prices of the crude oil
and fuel they imported by US$10/barrel to rake in huge
commissions.

Indonesia, though a net oil exporting country, still imports
between 15 percent and 20 percent of its annual fuel consumption
of 52 million kiloliters and 70 million barrels of crude, from
the Middle East.

Pertamina exports and imports crude oil and fuel through three
marketing arms: Pacific Petroleum & Trad Co. Ltd, which is 50
percent owned by Pertamina; Perta Oil Marketing Oil Ltd (30
percent owned by Pertamina) and Permindo Trading Oil Co. Ltd (35
percent owned by Pertamina).

Priyo alleged Perta and Permindo had marked up the prices of
their fuel and crude oil imports up to US$10 per barrel to obtain
a bigger commission. This had inflated Pertamina's production
costs, thereby increasing the prices of its fuel products.

But Pertamina's president, Soegianto, denied the allegation,
saying the companies earned only 10 U.S. cents commission per
barrel.

Priyo then asked Soegianto to name the other shareholders of
Permindo and Perta.

"No I won't disclose them," Soegianto said after a few minutes
of whispered consultations with his staff, which prompted an
uproar from the spectators.

After minutes of heated debates with other House members,
Soegianto promised to reveal the names of the shareholders
through a letter to be sent to the commission's chairman, Marzuki
Achmad.

An informed source at the House said yesterday the remaining
70 percent stake in Perta is owned by several foundations linked
to top political leaders and the other 65 percent stake in
Permindo is owned by the Bimantara Group, controlled by President
Soeharto's son Bambang Trihatmodjo, Soeharto's cousin,
Sudwikatmono and Nirwan Bakrie. (jsk)