JP/13/fuel

JP/13/fuel

The Jakarta Post
Jakarta

Bank Indonesia is asking the government to carefully consider the
timing of its plan to raise domestic fuel prices next year, so as
to keep its effect on the country's inflation rate within
manageable limits.

"I agree with recent suggestions that the hike be done during
harvest time," the central bank's deputy governor Hartadi Sarwono
said on Friday.

"It would also be better if the government decided to raise
fuel prices when the rupiah exchange rate was at a better level."

Hartadi explained that if the hike was done during the harvest
time, then a lower price of staple food items during that time
could counterbalance a possible rise in the prices of other goods
affected by the fuel price hike.

A stronger local unit, meanwhile, would mean that the price of
imported goods could be maintained, averaging out inflation as
well. The rupiah, however, weakened 0.4 percent to Rp 9,066 per
dollar on Friday.

"Pressure on inflation could further be relaxed if the
government could ensure the distribution of goods, particularly
of staple needs. The problem is that many producers and
distributors tend to raise their prices whenever a fuel price
hike occurs, even when it doesn't have anything to do with their
cost of production," Hartadi said.

"The government should also properly channel fuel subsidy
funds it will save from the hike for health, educational, and
infrastructure development purposes."

Hartadi added that the central bank would not be too hasty in
making any monetary policies, such as adjusting its SBI benchmark
interest rate, to counter a possible rise in the inflation.

"As long as core inflation maintains its current stable trend,
then we see no need for such an intervention," he said.

The core inflation rate is the underlying inflation rate of a
country's economy, excluding volatile energy and food prices.

The Central Statistics Agency earlier this month reported a
year-on-year inflation rate of 6.18 percent as of November. The
government has set its inflation target at 7.0 percent for this
year, and at 5.5 percent for 2005.

Meanwhile, Coordinating Minister for the Economy Aburizal
affirmed that the government would raise fuel prices in the first
quarter of next year, sometime during harvest time.

"But we are still working out the available options and we'll
consult with the House of Representatives, because what is good
for the state (budget) is not necessarily good for the people,"
he said.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said there were five options now being considered by the
government: First, raising prices only for industrial diesel oil,
bunker oil and Premium gasoline; second, raising prices only for
bunker oil and industrial diesel oil; third, raising prices only
for Premium gasoline; fourth, raising prices for oil automotive
diesel oil for transportation sector; fifth, raising prices only
for automotive diesel oil and kerosene.

The government will carefully study the options, before making
a decision, he said.

Elsewhere, the Indonesian Consumer Foundation demanded that
the government publicize the evaluation of last year's fuel price
hike before acting to raise them again.

"This is not about us agreeing with (the planned fuel hike) or
not, but if the government wants to hike prices, it must not
burden the poor too much," YLKI chairperson Indah Suksmaningsih
said.

"And to keep matters transparent, the government must first
share with the public the results of the last fuel hike, on
whether it had burdened poor people or not."

Furthermore, the government has to familiarize the public with
the hike plan to avoid possible resistance and inform the public
to what extent the plan would affect their lives, Indah added.

"I also urge the public to talk to the government on how the
hike affects them, because honestly, they are the ones who will
carry more burden than the rich people or the decision makers
themselves," she said.