GOVT TO GRADUALLY INCREASE LPG PRICE

By Andi Abdussalam

Jakarta, Aug 15 (ANTARA) - The government is considering raising the price of liquefied petroleum gas (LPG) in 12-kg cylinders in an effort to cover state-owned oil and gas firm Pertamina's losses said to amount to about Rp6 trillion per annum.

        However, the plan to increase the price is unlikely to be carried out until after the post-fasting month festivities to avoid boosting the inflation rate in the country. According to Pertamina, the government had agreed to raise the price of 12-kg liquefied petroleum gas (LPG).

        "The government has given the green light for the adjustment of the domestic price of LPG in 12-kg cylinders," Pertamina spokesman Basuki Trikora Putra said. But Pertamina has decided not to increase the LPG price until after the post-fasting month or Lebaran festivities. The fasting month will start August 22, 2009 and last 30 days.

        "Based on our considerations that consumers should not feel the burden in the runup to the fasting month, we decided not to raise the price until after the lebaran festivities," Putra said.

        The State Enterprises Ministry has proposed that the price of liquefied petroleum gas (in 12-kg cylinders be raised by Rp100-Rp200 a month until it reaches its economic level.

        "I think that is our proposal," State Enterprises Minister Sofyan Djalil said on the sidelines of a national accounting conference at Hotel Gran Melia recently.

        Because the LPG in 12-kg cylinders was not one of the subsidized goods and state oil and gas company Pertamina had been selling it at below its economic price, the company was suffering a financial loss of Rp6 trillion per year, he said.

        Therefore, the ministry agreed to an increase in the selling price of LPG proposed by Pertamina, he said.

        "The government does not subsidize it (the LPG price). That is why we must think of how it can be raised gradually until it reaches its economic value," he said.

        So far, the government has only subsidized the price of LPG in 3-kg cylinder. Last year, the company also proposed a price increase of Rp500 per kg of the 12 kg LPG.

        But the proposal last year was rejected by the government on ground that it would put a burden on consumers. Pertamina predicted it would suffer from a loss of Rp3.47 trillion in the 12 kg LPG sales in 2009.

        The figure is obtained from calculating the international LPG price assumption at US$505 per ton with the rupiah exchange value against the US currency at Rp11.600 per dollar.

        The US$505 price assumption is based on the contract price (CP) of Aramco in January 2009. With that reference, the economic viability price of LPG at the consumer level is Rp8,943 per liter. With a sale price at Rp5,750 per liter at the consumer level and with a sale target for 12 kg LPG of 1,085,430 tons this year, the losses expected to be suffered by Pertamina would reach Rp3.47 trillion.

        With regard to the plan to raise the gas price, National Development Planning Minister Paskah Suzetta said that Pertamina should withhold its plan and consult with the government in the first plance.

        "LPG concerns the interest of many people so that a plan to raise its price needs to be consulted to the government. The government will look at it first, and if need be it should provide a bigger subsidy," Paskah Suzetta said.

        The minister said that even though LPG in 12- kg cylinder was not included in the items of subsidized goods, a increase in its price would boost inflation.

        After all, in the coming several months there would be holidays such as the post-fasting month festivities that could generate the inflation rate.

        Legislator Hafiz Zawawi who is also chairman of the House Commission for national development affairs, said that it would be risky to raise the price of LPG at present because it could cause high inflation.

        Besides, an increase in the LPG price will create impacts on the assumptions several posts in the state budget. "It would boost inflation and bring changes to several assumptions in the state budget," Zawasi said.

        A researcher of Bank Indonesia (BI/the central bank) said an increase in the 12 kg LPG price would boost the inflation rate, much more after the success of the government's kerosene-to-LPG conversion program which caused more people used the gas.

        At present, the 12 kg LPG price is Rp5,750 per kg, while that of with the 50 kg cylinder is set at Rp7,000 per kg so that Pertamina has to provide a subsidy. Moreover, the 12 kg LPG is not included in the items that enjoyed a subsidy in the state budget.

        State Enterprise Minister Sofyan Djalil said previously that he had agreed to the plan of Pertamina to raise the price because the 12 kg LPG was not a commodity which was provided with a subsidy. Much more, Pertamina is predicted to suffer a loss of Rp6 trillion in subsidy. Thus, Pertamina is planning to increase the LPG price in stages each month about Rp100 - Rp200 per kg until it reaches its economic viability price.***2*** (T.A014/A/HAJM/13:10/f001 )