House says no to fuel price hike

JAKARTA (JP): All four factions at the House of Representatives urged the government yesterday not to raise fuel prices to protect the public's interests.

Most analysts have predicted that domestic fuel and electricity prices will have to be raised to enable the government to achieve a budget surplus equivalent to 1 percent of the gross domestic product, as required by the International Monetary Fund.

The factions also submitted to Minister of Finance Mar'ie Muhammad their proposal that the 1998/1999 state budget starting in April be set at between Rp 110 trillion (US$31.4 billion) and Rp 116 trillion, up from Rp 101.08 trillion in the current fiscal year.

Yesterday was the last day of a three-day working session of House Commission VIII for state budget and finance to discuss latest economic developments and preparations for next year's budget.

At the conclusion of the meeting, the House commission said it fully supported the government's measures, as explained by Mar'ie, already taken or to be taken to cope with the financial turmoil.

The House members also expressed full support of the government's decision not to help, directly or indirectly, bail out private sector foreign debt totaling $65 billion.

All the factions underlined the need for the government to maintain fuel subsidies in the next fiscal year to reduce the burden on people who are now suffering from the brunt of the financial crisis.

"Given the current economic situation, the Golkar faction asks the government not to raise fuel prices because such a measure would only burden our national economy even more," the Golkar faction's spokeswoman Mubha Kahar Muang said.

She contended that the current economic downturn and the weakening rupiah would result in a higher inflation rate which might be as high as 9 percent in 1998/1999.

Minister of Finance Mar'ie Muhammad said earlier that the government was subsidizing domestic fuel oil use because costs had risen due to the steep depreciation of the rupiah.

Spokesman for the United Development Party (PPP) faction Muchsin also suggested that the government maintain its fuel subsidies because the government received extra earnings from crude oil taxes generated by the higher-than-estimated oil prices in the international market.

Supriadi, the spokesman for the Armed Forces faction, concurred, arguing that "there is no need to raise fuel prices in the near future".

The spokesman for the minority Indonesian Democratic Party (PDI) faction, Nicolaus Daryanto, said the government should consider all aspects, including political implications, in raising fuel prices.

Mubha also cautioned the government not to change the base price of electricity.

State-owned electricity firm PT PLN said earlier this week that it had proposed to the government an increase in the base rate of electricity set in 1994.

The government has allowed PLN to adjust its prices quarterly according to the inflation rate and other costs, but any increase should be based on the 1994 rates.

But Minister of Mines and Energy I.B. Sudjana said yesterday that there was not any plan to raise the base price of electricity, at least until the convening of the People's Consultative Assembly in March.

"The decision to raise electricity rates should be a final option," Sudjana said.

The ruling Golkar faction proposed to balance the 1998/1999 budget at Rp 110.9 trillion, the Armed Forces faction at Rp 113.35 trillion and the PPP faction at Rp 115.7 trillion. The PDI faction did not give any budget figure. (rid)

Money policy-Page 12