Jakarta, Sept 25 (ANTARA) - The government must carefully assess its plan to raise the price of liquefied petroleum gas (LPG) in order to ensure that the move does not trigger inflation.
It is feared that the government's plan to raise LPG prices could generate inflation. Moreover, the August inflation rate of 0.95 percent is already higher than the government's earlier projection of 0.7-0.8 percent.
The government's plan to increase the basic tariff of electricity tariff by about 15 percent next year is also likely to boost the annual inflation rate to about 5.1 percent, higher than the 4.8 percent projected by Bank Indonesia (BI).
Therefore, legislator Bobby Rizaldi of the House of Representatives (DPR) Commission VII on energy affairs called on the government to examine the impact of raising the price of non-subsidized LPG before implementing it.
"It should not happen that the hike in the prices of electricity and LPG will cause economic turmoil. Therefore, the government should assess its impact very carefully," he said.
The government is considering the proposal of state-owned oil and gas company Pertamina to raise the price of non-subsidized LPG, including that of the 12-kilogramme cylinder gas.
Director General for Oil and Gas Evita Legowo said recently that the government would "study all aspects and potential impacts of the LPG price hike.
"We will discuss it soon," she added.
Marketing and Commercial Director of Pertamina Hanung Budya stated that his company had made a proposal to the government to raise the price of non-subsidized LPG.
"The proposal was made in order to reduce losses suffered from the distribution of non-subsidized LPG, worth Rp5 trillion, in 2012," he explained. Hanung said the price of the 12-kg LPG cylinder was also proposed to be raised because a majority of buyers of the 12-kg gas were 'financially capable' consumers.
"For people who are financially weak, the government is already providing subsidized gas in 3kg cylinders," he added.
Pertamina distributed 3-kg LPG cylinders among 53.9 million households in the country, with LPG consumption reaching 3.6 million tonnes per year.
"The programme has reduced government subsidies," Pertamina President Director Karen Agustiawan noted.
Earlier this year, Pertamina had made a proposal to the government to pass on the financial burden of gas refilling and transportation, worth Rp200 billion, to consumers in order to offset the losses. "We hope it would be approved soon," Hanung said.
At present, Indonesia's domestic consumption of LPG has reached 5 million tonnes per annum. Of the total, 3.6 million tonnes of gas are subsidized and 1.4 million tonnes are non-subsidized. While 2.2 million tonnes come from domestic production, 2.8 million tonnes are being imported.
Therefore, besides raising the price of LPG in the country, the government will also reduce imports and increase production.
According to Vice President Boediono, the government will increase the production capacity of the domestic LPG industry in an effort to reduce the country's dependence on imported energy.
"LPG imports have been growing rapidly and will continue to do so in the future. Therefore, more investment is needed to increase the production capacity of the domestic industry," he said during his speech at the 25th World LPG Forum at Nusa Dua, Bali, recently.
Bobby stated that the government must focus on the potential impact of the LPG price hike on inflation.
"It is a must for the government to examine its impacts. After all it is also planning to increase the price of electricity," he said on Tuesday.
Bobby pointed out that the increase in gas and electricity prices was likely to boost inflation by more than 1 percent, thereby exceeding the 'safe range'.
"It will have a severe impact on people in the lower income bracket as well as on small- and medium-scale enterprises," he added.
Bobby, who is a member of the Golkar Party, expressed hope that businesses that used 12-kg cylinder gas would not suffer from losses. "Raising the gas price should not be done keeping in mind only the operations of Pertamina but also other aspects and impacts," he said.
"Pertamina must take steps to operate more efficiently by reducing its imports of gas and cutting its transportation costs," Bobby added.
His colleague Dito Guninduto also agreed, saying the ¿government should raise the gas price at a time when the people do not feel it as a heavy burden¿.
"The government must study its plan to raise the gas price from various aspects. Pertamina should continue to suffer losses from the 12-kg cylinder gas business because the product is used by financially capable consumers. But the impact on the inflation must be assessed thoroughly," he added.
Meanwhile, Tulus Abadi, a member of the Indonesian Consumers Institute Foundation (YLKI), said the increase in the price of 12-kg cylinder gas would 'make consumers of 21-kg cylinder gas to move to the subsidized 3-kg cylinder gas'.
"Not only that, cases of 'oplosan' (filling 12-kg cylinders with gas from 3-kg units) will increase due to high price differences," he stated.
"This means that the government's subsidy will increase and there will be a scarcity of 3-kg cylinder gas supply in the market," Tulus added.***2***(T.A014/A/KR-BSR/A/A014) 25-09-2012 21:02:
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