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Indonesian Government Considers Hiking Fuel Prices by Up to 44%
January 31, 2012

“Indonesia is a funny nation. Most of us are not rich people yet we like to use a lot of  expensive fuel oil,” said Deputy Mines and Energy Minister Widjajono Partowidagdo. (Bloomberg photo). “Indonesia is a funny nation. Most of us are not rich people yet we like to use a lot of  expensive fuel oil,” said Deputy Mines and Energy Minister Widjajono Partowidagdo. (Bloomberg photo).
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Weegie-Boy
11:00am Feb 1, 2012

@Amiruddin Alauddin

"Today's generation MUST prepare to bare the hardship so that the coming generations of Indonesia will benefit."

This is ideally what it should be but from what I see Indonesians are a very much a me me attitude and only seem to care about the now. Rubbish gets thrown away every day without any care as to it's impact on the future.

The biggest issue here is will the elite spend the money on the infrastructure and people or pocket it themselves through corruption. So much chance here to make Indonesia better but you need the right people at the top for this to happen.

Solace
5:01am Feb 1, 2012

Thanks be to God...A Realist! Though the percentage is high and needs some adjustment, it would have the immediate effect of slicing Jakartas traffic burden.


Amiruddin Alauddin
7:27pm Jan 31, 2012

The decision made by the Indonesia’s government in considering hiking subsidized fuel prices by as much as 44 percent could possibly cause social unrest and from the political perspective, a decision that will not be popular. But if the funds is use for improving better infrastructure throughout Indonesia, I agree that it's a sensible decision. Indonesia's oil & gas industry won't last forever and the much needed improvement in basic infrastructure (to wait and to prolong arguing pertaining to this decision will only result in a much higher cost of building all the necessary infrastructure). Today's generation MUST prepare to bare the hardship so that the coming generations of Indonesia will benefit.


Wonderland
6:34pm Jan 31, 2012

Marko1- smart guy! And just how would you propose implementing that? They just ditched such an unworkable option!

marko1
4:16pm Jan 31, 2012

Jkt GDP is $30,000 and the rest of the country is around $3,000. why not adjust it accordingly...

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Indonesia’s government is considering hiking subsidized fuel prices by as much as 44 percent this year to reduce the burden of subsidies on the state budget and spend funds on roads instead, the deputy energy minister told Reuters on Tuesday.

Southeast Asia’s largest economy appears to be leaning towards raising fuel prices instead of reducing the use of subsidized fuel. The idea has gained support from the public, academics, businesses and some lawmakers, said Vice Energy Minister Widjajono Partowidagdo, though lifting fuel prices requires a change in the law, and still needs parliamentary and presidential approval.

But hiking fuel prices still faces opposition from some lawmakers in parliament because of worries it would spur inflation, which they fear could lead to social unrest. Sudden fuel price hikes in 1998 contributed to the downfall of autocratic leader Suharto.

Currently, Indonesia’s subsidized gasoline is the cheapest in Asia at Rp 4,500 ($0.50) a liter, which is half the market rate. Cheap fuel supports economic growth, but cost the government $18 billion in subsidies last year. Economists say the money would be better spent on improving poor infrastructure. 

“We will hike fuel prices this year,” Partowidagdo said in an interview. “The hike should be discussed first with the parliament, but it would be in the range of Rp 1,000-2,000.”  

A price rise of that size could hurt fuel demand in the short-term, though energy analysts say buoyant car sales from an emerging middle class means the country is likely to remain Asia’s largest gasoline importer.

The central bank expects inflation to near the upper end of its 3.5-5.5 percent target range this year if the government goes ahead with a fuel price rise, which could mean it is less likely to further cut rates.  

Raising fuel prices would still have less of an impact on inflation and fuel demand than the government’s previous plan to restrict the use of subsidized fuel from April, which would have effectively doubled fuel prices for private motorists.

Lawmakers said restricting subsidized fuel could not work as there are not enough pump stations across the sprawling archipelago that sell the higher quality non-subsidized fuel.

State energy firm Pertamina says it only has one refinery on Java island that produces the fuel. Higher fuel prices could spur investment in refining, and increased competition for Pertamina in retail fuel, which would also boost state coffers.

“Indonesia will not be developed if the money is spent on subsidies. The money should instead be used to build roads and fix transportation,” said Partowidagdo, a former energy academic.

Reuters