No deadline set for delay in fuel price hike: Minister

JAKARTA (JP): The government and the International Monetary Fund (IMF) have agreed to delay fuel price increases for an indefinite period, Minister of Mines and Energy Susilo Bambang Yudhoyono said on Tuesday.

"What's important is how we prepare ourselves and the people for the implementation of a support mechanism to protect poor people from the increase in fuel prices," Bambang said following a meeting with economic ministers and representatives of the IMF.

The government initially planned to raise fuel prices by an average of 12 percent on April 1, but mounting public opposition forced President Abdurrahman Wahid to delay the plan.

The last time the government raised fuel prices in 1998 provoke massive rioting, helping toward the resignation of former president Soeharto.

"So while we wait for the cut in fuel subsidies, the government will continue to prepare itself," Bambang said.

The government planned to protect the poor from the price increase by channeling cash aid of Rp 350 billion (US$43 million) directly to them through post offices across the country.

Director general of oil and gas at the Ministry of Mines and Energy Rachmat Sudibyo said last week the government was prepared to hike fuel prices within three months as of April 1.

The fuel price increases are included in the letter of intent signed by the IMF and the government to cut fuel subsidies in the April-December 2000 state budget.

Rachmat said the IMF's letter referred only to an increase in fuel prices within this year, without specifying a date.

However, he added, the delay would cost the government about Rp 250 billion in additional fuel subsidies each month.

Economists were of the opinion the public would accept the increase in fuel prices provided that the state-owned oil and gas company Pertamina operate more efficiently.

An audit of Pertamina by PriceWaterhosueCoopers for the period from April 1996 to March 1999 revealed inefficient practices and losses of income opportunities at the state company amounted to some $4.69 billion.

Pertamina has frequently blamed existing regulations for causing many of the inefficiencies and hampering its growth.

By law, Pertamina is subject to taxes of 60 percent, far higher than any company.

Pertamina president Baihaki Hakim said revising current oil and gas regulations was the company's highest priority in restructuring the company.

The IMF in its letter of intent also made the replacement of the current oil and gas law and the restructuring of Pertamina as prerequisites in obtaining its financial aid.

Bambang went on to say the government would officially propose a new oil bill to the House of Representatives in June.

He said the forthcoming letter of intent would also require Pertamina to submit progress reports on its restructuring programs to the government every quarter.

The previous government, with Kuntoro Mangkusubroto as minister of mines and energy, proposed to the House an oil and gas bill last year aimed at revoking Pertamina's oil and gas monopoly.

But the House shot down the bill, insisting that the company should maintain its monopoly rights.(bkm/rei)