GOVT STILL UNDECIDED ON FUEL CONSUMPTION CUTS

By Andi Abdussalam

Jakarta, March 3 (ANTARA) - The government is still undecided on  whether to go ahead with its  plan to limit subsidized fuel consumption as of April or postpone it until July 2011.          If the government goes ahead with its April plan amid world crude price increases, now reaching over US$100 per barrel, it will boost inflation. On the other hand, it has to increase additional funds amounting to between Rp3 trillion and Rp6 trillion if it postpones the plan.          "Looking at the price progress (of crude oil) which is now skyrocketing and triggering inflation on foodstuff, and the readiness of the Jakarta and its surrounding areas (to accept the limitation), it would be better if we postpone it," said Chief Economic Minister Hatta Rajasa said.          Although the implementation of the limitation of subsidized fuels needed to  be postponed, yet the government has yet to make a decision as the plan still has to be consulted with the House of Representatives (DPR).          Legislator M Romahurmuziy of the DPR's Commission VII on energy affairs suggested that the government postpone the implementation of the plan so that it could make preparations.          "The plan will most likely be put on hold in view of the current situation," Hatta Rajasa said on Thursday.          He said the global oil prices which recently reached a level of US$100 a barrel due to the Middle East crisis might raise the price of non-subsidized fuel Pertamax and if the use of subsidized fuel was limited many motorists would fearfully be reluctant to switch to Pertamax.          For its part, the government was waiting for the results of a study conducted by a team of officers on the impact of limited use of subsidized fuels, he said.          "The high oil prices may increase spending on Pertamax. The other assumptions will later be adjusted to the results of the study to see if there is distortion," he said. After all, he said, the imminent postponement of the plan to limit the use of subsidized fuels was an option the government still had to discuss with the House of Representatives (DPR).           Therefore,  the government has not made a final decision with regard to the implementation of the plan and a study is still being made to see the readiness and effectiveness of the plan in Greater Jakarta.           Finance minister Agus Martowardojo said the postponement could make the volume of subsidized oil consumption to reach above 40 million kiloliters to surpass the quota of 38.6 million kiloliters set in the 2011 budget.          State oil company PT Pertamina has earlier planned to implement limited sales of subsidized fuels (gasoline and diesel) in Jakarta and its surrounding towns in March 2011. This policy is also to be implemented nationwide in 2013.          The curb on subsidized fuel consumption may help Indonesia cut its subsidy spending in the state budget by 8.9 percent to 184.8 trillion rupiah for 2011.  The program will help the government cut subsidized fuel quotas in the 2011 budget by 40 percent to 22.16 million kiloliters, according to Karen Agustiawan, president director of the PT Pertamina in December 2010.          Finance Minister Agus Martowardojo said "if the plan cannot be implemented effectively in Jakarta, Bogor, Tangerang, Depok and Bekasi it would possibly be postponed. And if is decided to be postponed the message from the finance ministry is that consumption must not surpass 38.6 million kiloliters."     He said consumption above the quota would risk fiscal resilience particularly in terms of budget subsidy and volume. He said postponement of the plan had the potentials to increase the budget for subsidy by Rp3 trillion to Rp6 trillion.          "If it surpasses the quota I have already taken measures to provide an additional subsidy of Rp3 trillion to Rp6 trillion," he said.          He said that the figure was based on the world's oil price assumption at US$80 per barrel. "In general, we have the budget reference of the Indonesian Crude Price (ICP) at US$80 per barrel. Now the world crude price has reached over US$100 per barrel. However, we still have no plan to revise the assumption," the minister said.          The minister said his ministry still hoped that the government would go ahead to cut subsidized consumption in order not to increase consumption of subsidized fuel oil that exceeded 38.5 million kiloliters.          "If it is postponed it must be because the government is not yet convinced with the effectiveness and feasibility of the study. But we in the finance ministry have made a schedule for the subsidy cuts. The cuts in the sense that the limitation program should not exceed 38 million kiloliters," he said.          The chief of the team charged with studying  the impact of the limitation on socio-economic conditions, Anggito Abimanyu, said he hoped the government would stick to the plan because based on the results of study it was feasible.          "They had better accept it because it is done in April which is a deflation month. I think it is already due and I can give the testimony because I have studied it myself and seen the readiness at policy-making and ground levels. But for sure let us just wait for the options that we are going to give," he said.          Yet, legislator Romahurmuziy is of the view that the government had better postpone the implementation of its plan from April 2011 to September 2011, to have a chance of making preparations.          "It had better be postponed until September so that the government would have six months to make more comprehensive preparations," he said on Thursday.          He said that by making comprehensive preparations the government could apply the consumption cuts not only in Jakarta and its buffer towns but also in Java and Bali.      (T.A014/A/HAJM/00:02/a014)04-03-2011 00:17:5