Govt to set different prices for Premium, diesel

Satria Sambijantoro and Bagus BT Saragih, The Jakarta Post, Jakarta | Headlines | Tue, May 14 2013, 9:22 AM
The government is likely to raise the price of subsidized Premium gasoline by Rp 2,000 (21 US cents) and subsidized diesel fuel by Rp 1,000, ministers said on Monday.

“The details may be unveiled tomorrow [on Tuesday], as the government is still finalizing the plan before it can be discussed with the House of Representatives,” National Development Planning (Bappenas) Minister Armida Alisjahbana told reporters after a meeting in Jakarta.

Subsidized Premium and diesel are currently sold for Rp 4,500 a liter, below the market price for both fuels of around Rp 9,000 a liter.

Coordinating Economic Minister Hatta Rajasa, who was also at the meeting, said that the price of subsidized diesel fuel would only be increased by Rp 1,000 as a cushion for low-income consumers from inflationary pressure, especially due to the price hikes from fishermen, who use diesel to fuel their craft and who are expected to pass on price increases to customers.

“Diesel fuel is also linked to our logistics costs. It is widely used by ships, trucks — all transportation methods that touch the lives of our low-income citizens,” Hatta, who is also acting finance minister, said on Monday.

The announcement stimulated more discussion in the on-again, off-again debate on the government’s effort to raise subsidized fuel prices.

President Susilo Bambang Yudhoyono has remained undecided on the politically sensitive issue, despite initially floating the idea to curb ballooning fuel subsidies in March.

The President has said that any increase in subsidized fuel prices would depend on the House’s approval of cash compensation for the poor.

The subject of compensation, which was also paid when fuel prices were increased in 2005, has been criticized by several politicians, who have argued that the drive to make cash payments to the poor might be driven by political expediency, given the presidential and legislative elections in 2014.

On Monday, Yudhoyono met with House leaders in his office in Jakarta to discuss the planned increases and compensation programs.

House Deputy Speaker Priyo Budi Santoso said that the government had attempted to convince House leaders about the importance of four compensation programs.

The programs in question were the Keluarga Harapan (PKH), a family-based poverty alleviation program; the rice-for-the-poor program (raskin); a scholarships-for-the-poor program (BSM) and temporary direct cash assistance (BLSM).

“The President asked us to understand the importance of providing social protection programs, such as raskin and BLSM. We basically understand that, but the programs can only be launched with the approval of all factions at the House,” Priyo, a lawmaker from the Golkar Party, the second-largest faction in the
House, said.

Coordinating People’s Welfare Minister Agung Laksono, who was also at the meeting with Yudhoyono, said that targeted families, or the “very poor” with a daily income of less than $2, would receive Rp 150,000 in BLSM funds a month and Rp 1.5 million a month under the PKH program.

Eligibility for the PKH program would be determined by several factors, such as the number of school- age children in a family.

“According to data from the BPS [Central Statistics Agency] and the TNP2K [National Team for Alleviating Poverty], there are about 15.5 million vulnerable and very poor families comprising about 65 million people in the country, accounting for about 25 to 30 percent of population,” Agung said.

The government would propose allocating Rp 13 trillion or 14 trillion for the compensation programs, to be taken from the Rp 37 trillion the government has estimated it would save after raising fuel prices, according to Agung.

BLSM funds, Agung said, would be distributed via post offices across the country, a method used for previously implemented cash compensation program.

However, debate continues on how long BLSM funds should be distributed, with estimates ranging from three to five months to a year.

Analysts have said that it might be difficult to reach the political consensus on the cash compensation programs.

Only two of the nine political parties represented in the House, Yudhoyono’s ruling Democratic Party and Golkar, have supported the government’s plan to increase fuel prices and the compensation program.

Last year, the government’s proposal to increase subsidized fuel prices was turned down by the House at a plenary meeting after a fierce and prolonged debate.

“The President asked us to do him a favor,” Priyo said. “He wants that, this time, the process to be calm and peaceful.”


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