FUEL OIL PRICE PLAN GETS MIXED REACTIONS

By Andi Abdussalam

Jakarta, Feb 25 (ANTARA) - The government has hinted it will raise fuel oil prices next April, yet the plan still gets missed reactions and sparks are flying, both pro and con, among the public.          President Susilo Bambang Yudhoyono's administration is required, based on the law, to reduce subsidized fuel oil consumption, particularly premium gasoline, beginning April 1 to alleviate the burden on the state budget.          Yet, the gasoline consumption reduction scheme has sparked public debates which led the government to formulate a number of options, including the price increase option for subsidized premium gasoline which is now sold at Rp4,500 per liter.      President Susilo Bambang Yudhoyono said an option to raise the  price of subsidized  fuel oil as a response to the increase in global crude prices had been discussed at a cabinet meeting.          "I have taken a decision and provided directives that need to be followed up. Seeing the latest developments (on world crude prices), we have willingly or unwillingly raised the price of fuel oil to a proper level. We should also proceed to the fuel-to-gas conversion program in the short and long run," the president said.          He added that poor people who would likely be affected by the price rise and inflation would receive assistance, a kind of direct cash assistance once provided in the past or another modified form of assistance.          Therefore, the government is now calculating a proper price increase for subsidized premium gasoline.          Energy and Mineral Resources Minister Jero Wacik said that the government, which has planned to draw up a policy this year to limit petrol use, is considering a price within reach of the public.          "The option of reducing subsidies by increasing prices will take into account people's purchasing power," the minister said.     However, he added, the fuel-to-gas conversion option would remain to be applied for the next several years.           According to Anggito Abimanyu, who is  a lecturer at Yogyakarta-based Gajah Mada University, the correct price increase per liter of gasoline is Rp1,000. He warned that the price should be raised soon, or in May 2012 at the latest. Moreover, by increasing prices the government will have no need to provide assistance to the poor if it raises the price  by Rp1,000 per liter.           Anggito, who is also former head of fiscal affairs at the finance ministry, said the government should raise the price of fuel oil soon since, otherwise, it could create even worse conditions, as happened in 2008.           "The government should raise the price of fuel oil immediately because there is a strong external factor that necessitates it to do so," Anggito Abimanyu said.          He noted that if the government did not increase the price of fuel oil, the public would subsequently feel a greater impact because the price level would be higher if raised later.          Therefore, he suggested that the price of fuel be raised by Rp1,000 per liter in May, at the latest.          "The Rp1,000 per liter is the proper price. If the petrol is raised more than that, it can trigger inflation," he said, adding that Indonesia often experienced a deflation in May, so it would be correct to raise the price in May.          "If the government is late and raises it in June or July, it has the potential to trigger inflation, since during this period the inflation rate is usually high because it is the beginning of the academic year and is a holiday period for students," he said.          He added that if gasoline is raised by Rp1,000 per liter, inflation could be maintained at about 0.4-0.6 percent. But if it is raised in June, it will push up inflation to about one percent.          Besides, if it raises the price soon, the government will also be able to maintain economic growth at 6.3 percent, as long as it is able to keep the pace of its infrastructure development.          Therefore, the Indonesian Businessmen Association (Apindo) supported the government plan to raise fuel oil prices, especially if it diverted fuel subsidy funds to infrastructure development.          "Infrastructure, electricity and gas are vital things. We need good roads to ports," Apindo chairman Sofjan Wanandi said.          He noted that the diversion of funds to infrastructure development and logistics facilities would, in the long run, reduce production costs.          However, a public policy watchdog did not agree with the government plan to raise fuel oil prices, saying it would create public unrest.          "The plan to limit the use of subsidized fuels or raise their prices will not be effective because the actual problem does not lie in the plan," spokesman of the Executive Board of the Public Policy Studies Institute Salma Ruslan said in Makassar, South Sulawesi, this week.           Therefore,  the government should review its plan to raise the price of subsidized fuel oils and find solutions to oil subsidy-related problems to avoid public unrest, Slama urged.          If the plan is implemented, nobody would supervise its implementation in the field. On the other hand, low-income citizens would suffer due to actions in certain quarters, he said.          High-income people would still have access to subsidized fuels, which were actually only sold to low-and middle-income people.     "Who can tightly supervise the sale of subsidized fuels and ensure that subsidized fuels will only go to those entitled to them?" he asked.          The same opposition was also aired by a legislator from the opposition party. Arif Budimanta of the Indonesian Democratic Party of Struggle (PDI-P) said the government should rethink its fuel subsidy policy and refrain from increasing prices.          Any momentum in global crude prices cannot automatically justify the government's decision to raise the cost of subsidized fuel, he said.  "Actually, it is the people who enjoy the subsidy by using their money." ***2*** (T.A014/A/INE/a014)  25-02-2012