The government is considering these options following the request of many experts and legislators who believe that hiking prices would be more advantageous than limiting the volume of subsidized fuel consumption.
For this purpose, the government is creating three scenarios to prepare for a hike to prices of subsidized premium gasoline, as part of efforts to curb fuel subsidies.
Actually, President Susilo Bambang Yudhoyono has signed Presidential Regulation No 15 of 2012 on retail and consumer prices of certain types of subsidized fuel oils. "I have signed the Presidential Regulation," President Yudhoyono said on Monday.
Based on Regulation No. 15 of 2012, the government set the retail sales price of certain fuel oils. The price of kerosene has been set at Rp2,500, premium gasoline Rp4,500, and diesel oil Rp4,500, including the 5 percent tax.
Under Presidential Regulation No 15 of 2012 it was also said that the use of certain fuel oils would be limited in stages.
However, according to Coordinating Minister of Economy Hatta Radjasa, the government is still open to the option of raising prices of subsidized premium gasoline, as opposed to limiting its consumption.
Further, President Yudhoyono has said the government is seriously thinking of price adjustments, particularly a price increase is being seen as the best option.
"When the time comes, I will be responsible for whether or not there will be an increase. Now the important thing is to accelerate the conversion of fuel oils into gas fuel," the President said.
The government is planning to restrict the use of subsidized gasoline to public transport and motorcycles as of April 1 in an effort to cut oil subsidies, which have been a burden on the state budget.
Also, private cars are expected to switch to using high octane pertamax or gas, as called for in the government`s fuel-to-gas conversion program.
Based on Law No. 22 / 2011 on the 2012 state budget, the government is required to limit subsidized premium gasoline consumption in Java and Bali as of April 2012.
The program will start in Jakarta and its buffer towns of Bogor, Depok, Tangerang and Bekasi (Jabotabek) as of April 1, 2012. By June it will cover Surabaya in East Java in June and the whole Java and Bali at the end of 2012.
Also, premium gasoline consumption cuts in Sumatra will begin in April 2013 and diesel consumption limitation in June 2013.
The government decided to limit subsidized fuel consumption because purchases of subsidized fuels in 2011 reached 41.7 million kiloliters, or about 103.3 percent of the 2012 revised budget quota.
However, the House of Representatives (DPR) Commission VII earlier asked the government to study the possibility of fuel oil price hikes as one of the options to limit the use of subsidized fuels.
Teuku Riefky Harsya chairman of Commission VII said his commission was of the view that the government needed to reassess its plan after hearing reports from the energy minister and from other stakeholders such as BPH Migas (oil and gas regulator), state-owned oil firm PT Pertamina, Hiswana Migas, Indonesian Chamber of Commerce and Industry (Kadin), Apindo, Gaikindo,
representatives of small businesses (UKM) and energy experts.
"We heard from stakeholders saying it would be too expensive and unjust for private four-wheel vehicles to switch from premium gasoline to pertamax," he said, since pertamax`s price per liter is currently about 9,500, while subsidized premium is only Rp4,500 per liter.
However, the government should proceed with its plan to limit consumption and continue with its schedule for April 1, 2012 based on Law 22 / 2011 on the 2012 state budget, according to Teuku Riefky.
"We are of the view that raising the fuel oil price is against the law," he said.
Therefore, according to oil expert Kurtubi, who is also director of the Center for Petroleum and Energy Economics Studies (CPEES), the government and the parliament can revise Law No. 22 / 2011 regarding the state budget through the acceleration of the 2012 Budget Amendment discussion, which he said is a legal umbrella to raise fuel prices.
Moreover, raising prices is more advantageous than a policy to limit their consumption, an economic observer said.
"Based on economic calculations, raising fuel oil prices is a more rational policy. There will be no need to prepare infrastructure and monitoring instruments," Komaidi Notonegoro of the ReforMiner Institute said during a discussion at the Economic Journalists Communication Forum.
He additionally said if prices of subsidized premium gasoline and diesel oil were raised by Rp1,000 per liter, there would be a savings on a national scale of Rp38.7 trillion, and if they were increased by Rp1,500 per litter, the country would see a savings of Rp57.4 trillion.
But such a fuel oil price hike would also cause an increase of 1.07 percent in inflation, if the price increase was Rp1,000 per liter, and an increase of 1.58 percent, if the price increase was Rp1,500 per litter.
He further said that limiting the purchase of subsidized premium in Java and Bali would only save Rp26.71 trillion and Rp41.91 trillion if diesel consumption was also cut.
In this case, the government is now considering an option to raise prices. For these discussions, it has appointed a consortium consisting of the Bandung Institute of Technology (ITB), University of Indonesia (UI) and Padjadjaran University (Unpad), along with the Oil and Gas Institute of the Energy and Mineral Resources Ministry, to conduct the study according to the DPR`s request.
Deputy Minister of Energy and Mineral Resources Widjajono Partowidagdo said on Monday that the government is also discussing the possibility of raising the price of subsidized fuel oil for public transport vehicles, including small-scale business vehicles, by providing cash back as compensation.
"If the increase is Rp1,000 per liter, the cash back will be as much as that amount," he said.
(T.A014/INE/F001)
Reporter: by Andi Abdussalam
Editor: Priyambodo RH
Copyright © ANTARA 2012
