No fuel price hike on Jan. 1, minister says

The Jakarta Post, Jakarta

The government will not raise fuel prices on Jan.1 as earlier expected, because the planned increase is still being examined to take into account of a number of variables, including the latest developments in international oil prices, according to Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

"Fuel (prices) will not increase on January 1, 2002. We're still reviewing it from a number of angles, including the impact on (economic) sectors and the changes in international oil prices," Purnomo told reporters on Wednesday during a post-Idul Fitri gathering.

The government said three months ago that it would raise fuel prices by an average of 30 percent in January next year as a consequence of a cut in the fuel subsidy, needed to help reduce the burden on the 2002 state budget.

The policy is also part of an agreement with the International Monetary Fund.

The House of Representatives has approved the 2002 state budget, under which the fuel subsidy will be reduced to Rp 30.37 trillion (US$3.03 billion) from the estimated Rp 56.2 trillion-Rp 56.6 trillion for this year. The budget, however, does not specify when the fuel price hike will take place.

But the public has assumed that the increase would be implemented on Jan. 1.

Raising fuel prices has been a politically sensitive issue in this country, as it leads to increases in the price of various basic goods and lifts transportation costs. The former authoritarian president Soeharto was toppled in 1998 partly due to the fuel price policy in place at the time.

Purnomo said that the government was also still calculating the size of a compensation fund to be allocated to the poor, who would be the hardest hit by an increase in the price of fuel.

He added that the government was also still discussing better ways to communicate with the public about the policy.

The fuel price hike plan is based on the assumption of an average international price of $22 per barrel. However, crude oil prices are currently hovering at around $19 per barrel.

Meanwhile, non-governmental organizations opposed the planned increase, saying it would only add a further burden to the public, which was already suffering as a result of the three-year economic crisis.

"This (policy) clearly disregards the public interest," said Arimbi Heroepoetri of the Coalition of Civil Society for Public Policy.

Retno Widiastuti, executive secretary of the Indonesian Consumer Protection Foundation (YLKI), said that the fuel price hike would impose too large a burden on the community, as electricity prices and telephone tariffs were also set to increase next year.

Retno also lambasted the government for not providing a clear and transparent explanation of the fuel price policy.

She pointed out that the government had never revealed to the public the results of an audit of the policy.

"There has never been a clear and transparent explanation. Has the compensation (program) for the poor been running properly? What about fuel smuggling? Are they able to deal with it?"

Elsewhere, Purnomo said that the government would propose certain measures at this week's Organization of Petroleum Exporting Countries (OPEC) meeting in a bid to boost oil prices to the cartel's price range target of $22-$28 per barrel.

The first proposal would be an OPEC production cut of 1.5 million barrels per day (bpd) starting in January, although non- OPEC countries had not yet given a commitment to reduce their output by 500,000 bpd as demanded by the cartel.

The second proposition would be a proportional cut using a 3:1 ratio, depending on the output cut made by non-OPEC countries, meaning that, should non-OPEC countries only slash production by 300,000 bpd, OPEC should only cut by 900,00 bpd, Purnomo said.

Fuel Subsidy Fuel subsidy -- 2002: 30.37t, 2001: 56.2-56.6t* Fuel consumption(kiloliters) -- 2002: 52.77m, 2001: 54.6m Oil price (US$/barrel) -- 2002: 22, 2001: 24 Total budget -- 2002: 344t, 2001: 340.32t

(*an estimate after actual domestic fuel consumption for the year increased by 1.9 kiloliters from 52.77 million kiloliters).