No intention to raise fuel prices: Govt

JAKARTA (JP): The government has no intention of raising fuel prices despite the World Bank's suggestion that it increases prices to augment domestic revenues for its budget, ministers said.

"The government has no intention and there are not enough reasons to raise fuel prices," Minister/State Secretary Moerdiono announced after meeting with President Soeharto at Merdeka Palace yesterday.

At a separate occasion yesterday, Minister of Mines and Energy Ida Bagus Sudjana supported Moerdiono's statement, saying that the current fuel prices can still be economically maintained.

"A policy for adjusting fuel prices should consider many things. If it will burden the people, do we have the heart to do it?," Sudjana said after witnessing the signing of a power- purchase agreement between state-owned electricity firm PT PLN and two private electricity generating firms.

In its country report on Indonesia, which was disclosed to the media for the first time earlier this month, the World Bank recommended that the government raise fuel prices, electricity billing rates and mandatory forest royalties as a way to garner more revenues.

Responding to the recommendation, Minister of Forestry Djamaludin Suryohadikusumo stated that the government at the moment will not increase forest royalties because the move would force timber prices to shoot up.

Sudjana noted yesterday that raising fuel prices and electricity billing rates is not the only way to enhance domestic revenues. Besides, Sudjana added, the government sees no urgency in raising either fuel prices or electricity rates.

"Why should we be anxious over a proposal from abroad when related parties like the House of Representatives, PLN and (state oil firm) Pertamina have so far not proposed increases in their prices?" Sudjana queried.

He vowed that the government will maintain the current fuel prices until the government feels it necessary to propose an increase in prices to the House of Representatives.

The government foresees in its budget plan that profits from sales of fuel products will likely drop by 43.9 percent to Rp 827.8 billion (US$368 million) this fiscal year from Rp 1.47 trillion in 1995/1996.

For the current budget, the government is relying very much on non-oil revenues, which are expected to contribute Rp 63.2 trillion or 70 percent to the total budget of Rp 90.6 trillion.

In its report, the World Bank argued that domestic fuel prices are currently much lower than those in other countries. Besides, the World Bank said, Indonesians are now better off, with per capita income of over US1,000, and they, therefore, can afford such increases.

The current fuel prices have been in force since January 1993. As for electricity rates, the government already allows automatic rate adjustments.

Sudjana asked all parties, including the press, not to blow the World Bank's proposals out of proportion. He said the proposals were not supported by accurate data.

"I ask especially the press not to join the frenzy, harping on that matter. Don't become the foghorn over such proposals," Sudjana said.

He also rejected accusations that the government's policy to maintain the current fuel prices is based on political considerations only, saying that the policy is based on economic considerations.

Many have speculated that the government will not increase fuel prices until after next year's general election in the hope of attracting support for the ruling Golkar party.

Iraq

Sudjana and Moerdiono also said yesterday that the government has carefully watched the development of oil-for-food negotiations between the United Nations and the Iraqi government.

After months of faltering since the UN Security Council authorized Iraq to sell $2 billion worth of oil over a six-month period to buy humanitarian needs, the Iraqi government agreed to serious negotiations earlier this year.

A draft agreement was reached last month, but the United States and Britain want to toughen it up to prevent Iraq from manipulating the food aid or diverting oil revenues for illicit arms purchases.

"That embargo has long made the Iraqi people suffer and has worsen their country's economy," Sudjana said yesterday, pleading other members of the Organization of Petroleum Exporting Countries to restrain from pumping out more crude oil and to help maintain current oil prices.

Iraq and Indonesia are both members of the organization.

Many have speculated that the Iraqi sales of $2 billion worth of oil, or some 700,000 barrels a day over the six month period, will drive world oil prices down.

Moerdiono said oil prices are expected to remain above the government's estimate of $16.50 a barrel. However, if the prices fall below the government's target, the government has enough financial reserves to cover the possible drop in oil revenues. (rid/pwn)