Market operation will continue to address kerosene shortage

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.