Indonesia government studies impact of postponement in LPG price hike

Indonesia government studies impact of postponement in LPG price hike

Photo document of LPG (Liquefied petroleum gas). (ANTARA/M Agung Rajasa) ()

"The plan is still being discussed by the government."
Jakarta (ANTARA News) - Finance Minister Agus Martowardojo said the ministry is studying the effect of the decision to postpone raising the price of liquefied petroleum gas (LPG).

State oil and gas company PT Pertamina has postponed raising the price of LPG in 12-kg canister originally planned this month.

"The plan is still being discussed by the government," Agus said here on Monday.

Agus gave no details about the effect of the delay but the decision would certainly result in an increase in losses to be suffered by Pertamina, which sells LPG below its production cost.

Head of the Fiscal Policy Board of the ministry Bambang Brodjonegoro said postponement of the price hike would help keep inflation from rising higher since early 2013.

"It is good as we hope that we could curb the rising trend of inflation in the first two months of 2013, Bambang said last weekend.

Bambang said the delay in the price hikes and stability in the prices of essential goods will press down inflation in March and April.

The prices of essential goods have been stable on supply being sufficient ahead of harvest time, he noted.

Earlier Vice President for Corporate Communications of PT Pertamina Ali Mundakir said the company had decided to postpone an increase in the prices of LPG in 12 canisters until time yet to be determined.

The government provides subsidy on LPG in 3-kg canisters but on on LPG in 12-kg canisters.

"We are aware of the concern of the government, therefore, we will review the plan to raise the price, delaying until the right time," Ali said.

Originally the price was to be raised 36.2 percent from Rp5,850 to Rp7,966.7 per kilogram or a selling price of Rp95,600 per canister by agent to consumers in March, 2013.

The price hikes was to reduce the losses suffered by Pertamina. Despite an increase Pertamina will still suffer a loss of around Rp3.9 trillion a year in the 12-kg LPG business.

Currently Pertamina suffers a loss of Rp5.1 trillion a year for selling 12-kg LPG below its production cost.