Ministries scramble to support fuel price hike

JAKARTA. With the exact figure for fuel price hikes still being debated, President Susilo Bambang Yudhoyono has demanded that relevant government agencies help come up with scenarios to support the widely unpopular policy and prevent a political backlash.

State-Owned Enterprises Minister Dahlan Iskan said on Thursday that Yudhoyono had requested all state companies to allocate all their corporate social responsibility (CSR) funds “to ease people’s burden” due to the upcoming price increase.

“We have identified several vulnerable areas such as city slums, riverbanks, homes along railway tracks, fishermen settlements, isolated areas, mountains and fallow rice fields. We’ll direct the CSR funds to these areas,” he explained at a press conference at his office.

Yudhoyono has also ordered the Finance Ministry to allocate funds for direct cash assistance for the poor to compensate for the fuel price hike. The government distributed Rp 100,000 monthly in cash assistance to poor families after fuel price increases in 2005 and 2008.

Energy and Mineral Resources Minister Jero Wacik formally apologized to the public on Thursday for the likelihood of subsidized fuel prices being increased in the near future. He said his ministry was currently calculating the amount of the increase. He previously said that the increase would not exceed Rp 1,500 a liter.

Finance Minister Agus Martowardojo announced that the government and the House of Representatives would discuss the revision of the 2012 state revenue and expenditures budget in March to accommodate the price increase option.

“The discussion may take 30 days, and on April 1 we can raise the price [if it is approved by the House],”
he said.

The Energy and Mineral Resources Ministry’s director general for oil and gas, Evita Herawati Legowo, revealed that her office was currently discussing possible policy scenarios in response to the President’s requirements.

“We’re discussing whether the restriction policy will still be implemented if subsidized fuel prices are increased,” she said via text message on Thursday, referring to an initial plan to prohibit private cars in Java and Bali from buying subsidized fuel while encouraging the use of gas.

“However, no matter what policy is chosen, the government will keep pushing for the conversion of oil-based fuels to gas-based,” she added.

On the fuel restriction plan, Coordinating Economic Minister Hatta Rajasa said all measures were being taken to ensure that consumption did not exceed this year’s 40 million kiloliter quota.

“The restriction doesn’t mean certain people can’t buy certain fuel, but it’s our effort to control consumption and combat distortions in distribution,” he revealed.

The chairman of the Association of Fuel Station Owners (Hiswana Migas), Eri Purnomo Hadi, agreed with Yudhoyono that raising the price of subsidized fuels would be easier. He argued that people would better accept the policy than fuel restrictions, which would be difficult to supervise.

He said that raising the price of Premium gasoline (one of most used subsidized fuels) by Rp 1,000 from the current Rp 4,500 (49 US cents)per liter would not result in turmoil. People would be shocked for a while, but then they would adjust their consumption pattern to the new price, he added.

However, Eri worried about financial losses suffered by fuel station owners who had invested in new storage tanks for non-subsidized fuels. Revenue from selling non-subsidized fuels is far below that of subsidized fuels, he reported.

“The government has to pay attention to the financial risk that fuel station owners may experience,” he emphasized. (Rangga D. Fadillah and Bagus BT Saragih/ The Jakarta Post)