GOVT LOWERS PREMIUM GASOLINE PRICE

By Andi Abdussalam

      Jakarta, Nov 7 (ANTARA) - After various calls and public pressures, the government finally decided on Thursday to lower the price of subsidized premium gasoline from Rp6,000 to Rp5,500 per liter effective on December 1, 2008.

        But observers said the government's decision did not significantly benefit small people as it did not lower the price of diesel oil which is consumed by people of lower layers such as fishermen.

        The government's decision to cut the price of subsidized premium gasoline was announced by Acting Coordinating Minister for Economic Affairs Sri Mulyani, accompanied by Energy and Mineral Resources Minister Purnomo Yusgiantoro, at the Presidential Office on Thursday evening.

        "The government has decided to cut premium gasoline price by Rp500 per liter from the present Rp6,000 per liter to Rp5,500 per liter. This indicates the government's commitment to reducing the people's burden with various instruments and resources it owns," the minister said.

        The government made the decision in response to the people's aspirations developing in society and the downturn in world crude prices over the last several months which have reached US$65 a barrel.

        Besides, the decision is also to respond to the on-going global financial crisis that has weakened the country's economy so that the people's ensuing burden would be reduced and neutralized.

        The government hopes that the decision to lower the gasoline price would raised their purchasing power, boost business world activities and to withstand the cycle of economic meltdown as a result of the world crisis.

        "In the implementation of the policy, the government will carry out monthly evaluations on various indicators that affect domestic fuel oil prices such as world crude oil prices, exchange currency rates and fuel oil consumptions," Sri Mulyani, who is also finance minister, said.

        In spite of cutting down gasoline price by Rp500, the government will still allocate a fuel oil subsidy worth Rp57.6 trillion with the assumption of oil price at US$80 per barrel.

        "At present range of crude price in the world market at US$65 per barrel, the government has enough ability to manage the 2009 state budget," she said.

        Before making the decision, the government has taken into account various inputs from the public and evaluated the ability of the 2008 state budget and the 2009 one, according to Mulyani.

        "Monthly fluctuations of premium gasoline prices have reflected the average price of the fuel commodity but our budget, particularly the 2009 state budget is still able to fund it," Mulyani said.

        The government, of course, will continue to consult with the House of Representatives (DPR) on matters relating to fuel oil subsidy allocations, particularly its impact on the 2009 state budget.

        Therefore, the government's policy to lower the gasoline price will be based on monthly evaluation and on the budget available.

        "The reminder of this year's budget is only enough to lower the price of subsidized premium gasoline," Director General for Oil and Gas Affairs Evita Legowo said.

        Previously, Evita Legowo said that the realization of subsidized budget up to October this year had reached Rp130 trillion, exceeding the subsidy target set at the 2008 revised budget at Rp126 trillion.

        The fuel oil subsidy will increase by Rp3 trillion if subsidized fuel price is cut by about Rp500-Rp800 per liter this year.

        The government will make adjustments to premium gasoline price each month following its policy on Thursday to lower the price of the fuel oil from Rp6,000 per liter to Rp5,500 per liter effective as of December 1, 2008, a minister said.

        Minister for Energy and Mineral Resources Purnomo Yusgiantoro said that the price adjustment would be made each month in line with the developments of the world crude prices.

        "There will be adjustment and price announcement each month. Evaluation will be made based on the Indonesian Crude Price (ICP)," the minister said.

        He said that the reduction by Rp500 per liter was arrived at after taking into account the tax cut of subsidized premium gasoline.

        With the price reduction, he said, the government has to provide Rp750 billion subsidy in December 2008 with a sale projection of 1.5 million kiloliters.

        However, the price cut by Rp500 of subsidized premium from Rp6,000 per liter to Rp5,500 per liter is considered unable to provide positive impact for small people.

        Economic observer Aviliani said that the government policy which lowered only the price of subsidized gasoline would be enjoyed by people of the middle class who owned motor vehicles.

        "The effect on the poor who actually deserve the benefits of subsidized fuel oils is not so significant," she said.

        She said that the policy would neither able to improve the purchasing power of the people because industries would not going to lower goods prices.

        Likewise, public transportation fares would not experience a downturn either after fuel oil prices were raised in May 2008.

        "The reduction of subsidized premium gasoline price will not have impact at all on commodity prices and transportation costs," she said.

        The Organization of Land Transportation Owners (Organda) has said it was not able to reduce their transportation fares following the government's policy to cut the gasoline price.

        "What is lowered by the government is the price of premium gasoline while most of public transportation vehicles use automotive diesel oil," Organda Chairman Murphy Hutagalung said. ***3*** (T.A014/A/O001/A/O001)  07-11-2008 12:10:21