Premium gas may hit Rp 4,000

Rendi A. Witular and Urip Hudiono, The Jakarta Post, Jakarta

The newly approved state budget revision will save the government Rp 10 trillion (approximately US$967 million) in fuel subsidy expenditures for the remainder of the year.

Coordinating Minister for the Economy Aburizal Bakrie said on Wednesday that the remaining fuel subsidy costs could boost subsidized fuel prices by more than double the current prices.

At present, the government still subsidizes premium gasoline, diesel fuel and kerosene to keep the prices at Rp 2,400, Rp 2,200 and Rp 700 per liter, respectively.

With market prices of the now-subsidized fuels averaging around Rp 5,000 per liter, the prices may end up at Rp 4,000 after the hike, Aburizal said.

"The percentage of the (fuel price) hike is still being calculated," he said.

The government will announce the new fuel prices on Friday.

The government's spending on the fuel subsidy has reached Rp 80 trillion this year from the approved Rp 89.2 trillion for the entire year. With fuel consumption estimated to reach about 10 million kiloliters at the end of December (also the end of the fiscal year), the subsidy will likely give consumers a discount of between Rp 800 and Rp 1,000 per liter.

The government's proposal on the second and final revision of the 2005 state budget was finally approved by the House of Representatives in a six-hour debate and a 273-to-83 vote on late Tuesday.

The approval forecast the fuel subsidy to cost Rp 89.2 trillion from the previous Rp 76.5 trillion and forecast the deficit to be Rp 25.1 trillion, or 0.9 percent of the gross domestic product (GDP).

Prior to the announcement, long lines at gas stations and kerosene depots have become a common scene nationwide as people began panic buying and "opportunists" started hoarding.

Aburizal assured the nation that the government would keep the amount of subsidies in check and at the same time ensure that the new prices and their snowball effects would not significantly burden the public.

"In addition to the direct subsidy scheme for low-income families, the government also plans to provide fiscal incentives for companies following the fuel price hike," he said.

The cash-strapped government has been desperately trying to maintain its fiscal viability, as global oil prices hover over US$62 per barrel.

The soaring price has forced Indonesia, the only Organization of Petroleum Exporting Countries member that imports oil, to dig deeper in state coffers to finance imports on 300,000 barrels of crude oil and 400,000 barrels of refined fuel products each day.

To ease the impact on the low-income people from the raising fuel prices (and related commodities' prices that rely on land transportation), the government has allocated a total of Rp 4.65 trillion in the direct assistance scheme.

As of Wednesday, the government had transferred Rp 1.7 trillion, less than a third of the fund, to the Ministry of Social Services, State Minister for National Development Planning Sri Mulyani Indrawati said.

"The money will be distributed to poor people that are eligible to receive the direct subsidy," she explained.

Each of the estimated 15.6 million low-income households will receive Rp 1.2 million over the next 12 months.

The social services ministry will transfer the cash to government-appointed PT Pos Indonesia and Bank Rakyat Indonesia (BRI) branches to be distributed to people living on or below the poverty line with an individual monthly income of Rp 175,000 at the most.

Mulyani dismissed the possibility of irregularities in distributing the money, saying it would be audited and both BRI and Pos Indonesia would cover any "financial leakages" that occur during the process.

"We are not very worried about irregularities (in the distribution)... we are more concerned with the number of unregistered, but seemingly eligible, recipients," she said.

Coordinating Minister for People's Welfare Alwi Shihab said the government had found an indication that about 10 percent of the people registered in Jakarta were actually not eligible to receive the assistance.

"We have conducted several field verifications in Jakarta, where we have uncovered irregularities in the registration process. Some of them are fairly rich, particularly a couple of families we saw with large color TVs and satellite dishes," he said.