Govt to find ways to increase fuel prices to reduce subsidies
Tuesday, August 29 2000 - 02:30 AM WIB
Because of the delay in the implementation of new fuel price increases from April to October, the government has to bear increased fuel subsidies. A number of parties predicted that the fuel subsidies could reach around Rp 30 trillion, a lot more than Rp 22.4 trillion allocated in the 2000 state budget.
The deputy chairman of the House of Representatives' Budget Committee, Abdullah Zainie, said that besides the delay in the fuel price increase implementation, soaring crude oil prices, the weakening rupiah and the increasing fuel demands would certainly raise fuel subsidies.
He noted if the government postponed the fuel price increase from October until December - because of public pressure - fuel subsidies would jump to Rp 33 trillion.
Coordinating Minisiter for the Economy Rizal Ramli said that in one side Indonesia got a windfall profits from the soaring crude oil prices to around US$30 per barrel in the international market. However, the increasing crude oil prices also pushed up the government's fuel subsidies.
Therefore, Rizal said the government was finding ways to reduce the subsidy level without harming the market and the people.
Rizal said he had tasked Minister of Energy Resources Purnomo Yusgiantoro to find the formula. He gave Purnomo one week time to find the formula, which would then be discussed among economic ministers.
Purnomo used to say that he would prefer a direct subsidy, namely by giving cash money to the needy, to indirect subsidy, that is the subsidy given in the pricing of fuels like what is implemented now. He argued the indirect subsidy benefited industries and those who actually did not qualify for the subsidy, and it opens the possibility for fuel smuggling.
Purnomo said on Saturday that he would coordinated with related parties to fight rampant fuel smuggling.
Coordinating Minister for Political, Social and Security Affairs Susilo Bambang Yudhoyono said that he would help Purnomo in curbing fuel smuggling.
Based on an audit by Sucofindo and Surveyor Indonesia, around 30 percent of fuels allocated by state oil firm Pertamina for industrial consumption went into the black market or smuggled abroad. And a number of people in state-owned enterprises, including Krakatau Steel, were involved in the ill practices. The ministry of mines and energy, when it was headed by Susilo Bambang, knew about the practices, but did not take stern measures.
To reduce smuggling, Pertamina president Baihaki Hakim said that Pertamina would now supply fuels to industrial firms based on their needs only. However, some parties expressed skepticism if Pertamina could implement it. (*)