Market operation will continue to address kerosene shortage

The Jakarta Post, Palembang/Makassar

The state-owned oil and gas company Pertamina would continue to conduct "market operations" in various parts of the country to help resolve the current kerosene shortage problem, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Sunday.

He said that the operations should be effective in making kerosene available to low income people at affordable prices.

Purnomo was speaking to reporters in Palembang, South Sumatra, while overseeing the launch of the market operation in the area.

"The market operation should help ease the (kerosene) shortage problem," he said.

During the past couple of weeks, several parts of the country have been hit by kerosene shortages, causing the price of the fuel to surge by more than 100 percent, and creating fears of renewed social unrest.

Government officials said that the kerosene shortage was primarily caused by hoarding and panic buying, as people anticipated the planned increase in fuel prices this month.

The government has said it would raise fuel prices by an average of 30 percent in January in a bid to reduce fuel subsidies and help ease the burden on the state budget.

It is not yet clear exactly when the government will implement the price rises. Director general of oil and gas Rachmat Sudibyo said earlier that the fuel price hike had to be implemented quickly to bring an end to hoarding activities.

A cabinet meeting is scheduled for Monday, but Purnomo was unsure if the meeting would also discuss the planned price rise.

He said that, according to the original agenda, the meeting would only focus on the much-criticized debt and corporate restructuring program operated by the Indonesian Bank Restructuring Agency (IBRA).

Raising fuel prices is a politically sensitive issue in the country, particularly given the current economic hardships. But the government has no alternative to removing the fuel subsidies if it wishes to avoid a fiscal disaster and bring an end to the lucrative fuel smuggling business. By 2004, it is hoped that kerosene will be the only fuel still being subsidized by the government, to the tune of around Rp 10 trillion (about US$1 billion) compared to the current subsidy of Rp 30.3 trillion.

The country's heavily-subsidized fuel products have long been smuggled to neighboring Singapore and Malaysia. Curiously, imported kerosene products have also been smuggled out of the country.

Meanwhile, the retail price of kerosene in South Sulawesi has soared to between Rp 1,500 and Rp 4,000 per liter since November, compared to the normal retail price of Rp 900 per liter.

Price hikes have been most severe in remote locations, such as in Polmas and Palopo regencies.

Public relations officer for Pertamina's South Sulawesi office Nadjamuddin told The Jakarta Post that, in addition to hoarding, the limited allocation of kerosene in the province had been the main cause of the increase in prices.

He pointed out that, according to the 2001 state budget, the volume of subsidized kerosene allocated to the province was only around 1.32 million kiloliters, but as of the end of October, the amount disbursed to the public had already reached 1.14 million kiloliters.

Elsewhere, dozens of university students from the IAIN Alaudin Makassar held a demonstration on Saturday to protest against the government's fuel price hike plan.

The protesters, who commandeered two fuel trucks during the demonstration, said that the fuel price hike would only lead to greater suffering for the poor.

The government plans to provide compensation funds to help the poor in dealing with the higher prices. Under the current 2002 state budget, the compensation fund is set at around Rp 2.2 trillion.

But Purnomo said that the government was now proposing to raise the fund to around Rp 2.8 trillion.