Govt mulls raising industrial fuel prices by 50%
Thursday, May 17 2001 - 04:30 AM WIB
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday (March 16) that he would propose to a Cabinet meeting on Thursday to float the prices of industrial fuels to the market mechanism, that would practically raise their prices by 50 percent, Neraca daily reported on Thursday.
"We are still reviewing the option, and it will be discussed at the Cabinet meeting tomorrow (Thursday). One of the option is to adjust the prices of fuels not used by the people at large such as burning oil and diesel oil to the level of the international prices or in accordance with their economical value," Purnomo said on the sidelines of a hearing with the House of Representatives deliberating the oil and gas bill.
With the floating of such industrial fuels to the market mechanism, the government would be able to cut fuel subsidies by Rp 6 trillion from Rp 66 trillion to Rp 60 trillion.
The minister conceded that if the government agreed to float the prices of industrial fuels to market mechanism, it would have the lowest risks, in terms of social, political considerations. Increasing industrial fuel prices would not create any social upheaval.
"Just look at avtur and avgas (aviation fuels), when we lifted their subsidies and let the prices adjust to the market mechanism, it did not create any impact to the society because those fuels were not consumed by the people at large," he said.
When asked about the timing to increase the industrial fuels, Purnomo declined to disclose it, saying that he had seven months until December to select the timing.
Following the government's decision to raise industrial fuel prices in April, the prices of industrial fuels, including diesel oil, for industrial customers stay about 50 percent of the international prices of the same fuels
The government applies the same prices of industrial fuels, or 100 percent, with those in the international market for the use of large oil and gas as well as mining companies in the country, that are mostly owned by foreign corporations.
At the current rupiah level of around Rp 11,000 against the U.S. dollar, domestic diesel oil should sell at above Rp 2,000 a litter. (*)