Govt sets three conditions for its plan to cut fuel prices
Wednesday, November 5 2008 - 01:19 AM WIB
The ministry?s Director General of Oil and Gas Evita Legowo said in Jakarta on Tuesday that the cut in the subsidized fuel prices could be made with three conditions including that the Indonesian Crude Price (ICP) falls to US$70 per barrel, the value of rupiah against the U.S. dollar is not higher than Rp 10,000, and the House of Representatives agree to increase fuel subsidy by Rp 3 trillion this year.
If the three conditions are met, the government could lower prices of the subsidized Premium gasoline and diesel oil by between Rp 500 and Rp 800 per litter (1US$= Rp 10,900).
Evita said that the government still needs an additional subsidy of Rp 3 trillion to cope with the planned cut in the fuel prices because the realized sales of the subsidized fuels had exceeded the 35.5 million kiloliters allocated in the state budget.
In May, this year the government raised the prices of subsidized fuels as an adjustment to the surge in the world crude prices. The price of subsidized Premium fuel was raised to Rp 6,000 per liter from Rp 4,500, while the price of the subsidized diesel fuel was increased to Rp 5,500 per liter from Rp 4,300. The price of the heavily subsidized kerosene was raised to Rp 2,500 per liter from Rp 2,000 per litter.
With the fall in the crude oil prices, the prices of the subsidized fuels are now almost the same with those of the non-subsidized fuels sold to industries especially for Premium gasoline and diesel oil. The price of non-subsidized Premium gasoline which was lowered to Rp 5,925 per liter last week has even been higher than the Rp 6,000 per liter set the subsidized gasoline.
The price of the crude oil which reached its high of US$150 per barrel in June has declined more than a half to about $65 a barrel on fears of the global economic recession. (*)