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News Focus: Government urged not to increase fuel prices by 30 pct
uusjio | May 4, 2008 at 07:08 pmby
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The increase in domestic fuel prices is expected not to reach 30 percent, as it will be a burden to the people who are currently facing price hikes in many daily needs.
Ir Syariffudin Mahmudyah M. Eng, an expert on energy at the Technical Institute of Surabaya suggested the government should not increase domestic fuel prices by 30 percent.
"The increase of fuel oil prices is regarded as unavoidable, but the rate of the increase is recommended to range from 10 to 15 percent," said Syariffudin who is Chairman of the Energy Studies and Assessment Center (ESAC) here on Sunday.
The price of unsubsidized fuel oil have now reached Rp9000 per liter, but that of the subsidized fuel oil remains at Rp4,500 per liter.
If the subsidized fuel is to be increased by 30 percent, the price will reach Rp6,000 per liter. Should the government adopt this policy, the people will most likely express an objection, he said.
Hence, he added, it would be much better to raise the prices by 10-15 percent to Rp5,000-Rp5,250.
However, by increasing the price of fuel oil by 10-15 percent, a retrenchment in oil consumption should also be made such setting shorter working hours of shopping malls.
"If the increase in uel oil price is not coupled with reducing energy consumption, I am afraid that our state budget will be facing a high risk, because one-third of the state budget could be used to subsidize fuel oil and electricity," he said.
Fuel oil will be in a precarious state, if the government`s subsidy for energy reached Rp187 trillion, while the government only allocated Rp88 trillion in energy susbsidy on the assumption that fuel oil price stands at USD 85 per barrel.
In fact, the price of crude oil per barrel has reached USD120. However, it is possible that the price may even reach USD140 per barrel because of the crisis in Negeria, he said.
In addition, the government`s reluctance to increase the price merely on political consideration was regarded as a blunder because rising fuel oil prices was a rational matter, and perhaps it could be done in stages, Syafruddin said.
Earlier, Energy and Mineral Resources Minister Purnomo Yusgiantoro said the government would raise domestic oil prices in June this year.
According to him, the government was still studying a proposal from the Indonesian Chamber of Commerce and Industry (Kadin) for an increase in subsidized fuel oil prices as part of efforts to address the skyrocketing fuel subsidy due to the surging global crude prices.
Global crude oil prices which are hovering at US$120 a barrel may push up fuel subsidy to more than Rp125 trillion.
The finance ministry in the meantime was considering a plan to raise subsidized fuel oil prices by 28.7 percent next month.
It was said that the price of ...