Fuel prices to raise by 30 percent

After a four-day debate plus intensive closed-door lobbying, the House of Representatives state budget task force finally agreed late on Friday to raise fuel prices by an average of 30 percent, as proposed by the government.

Under the decision, the price of gasoline will be increased to Rp 1,450 per liter (from the current price of Rp 1,150 per liter, US$ = 11,200), automotive diesel to Rp 900 (Rp 600), and kerosene to Rp 400 (Rp 350). The three fuel commodities are the most widely used by the general public.

The price of industrial diesel and bunker fuel for industries will be maintained at 50 percent of the international market price.

The price increase would be effective from June 15 as planned.

The fuel price increase is part of the government's measures to help maintain the 2001 state budget deficit at a safer level of around 3.8 percent of gross domestic product (GDP).

Without fuel price increases fuel subsidies could explode to around Rp 66 trillion, from the initial estimate of Rp 41.3 trillion, due to the drop in the rupiah.

To curb the deficit, the government has proposed the fuel subsidy be reduced to around Rp 60 trillion by raising fuel prices by an average of 30 percent.

The House task force decided that the 2001 fuel subsidy will total Rp 53.7 trillion.

The task force, however, was undecided over the size of the total volume of subsidized fuels that will be produced by the state-owned oil and gas company, Pertamina, this year.

For the time being, the legislators agreed to the government revised estimate of 52.7 million kiloliters. The government initially set 2001 fuel volume at 54.8 million kiloliters. The reduction was made after assuming that 20 percent of the volume could be saved through efficiency measures and curbing fuel smuggling. (*)