Subsidized Premium Gasoline and Diesel Oil Prices

The government `s signal over the weekend to reduce the subsidized premium gasoline and diesel oil prices in the middle of this month, raised hopes of increased public purchasing power and falling prices and transportation fares.

Yet also prevail. Despite a further reduction, product prices remain unchanged, as was demonstrated when the government lowered the price of fuel oil twice in December last year.

It may even become worse if the government was forced to raise petrol and diesel due to the price of crude oil prices to unexpected rebound in the global market. It would probably be an increase in prices of goods and transport fares.

In such a case, the government `s efforts to relieve the people of the increase in the power and fuel by reducing the price of oil in the middle of the impact of the global economic crisis will fail.

"It is not enough for the government to reduce the price of fuel oil, then let the market decide mechanism (lower) price. It should have a clear plan for lower prices," Farid Wajdi, Director of Protection Consumer and Advocacy Institute (LAPK), said.

He said the government had lowered the price of fuel oil on two occasions but has not yet affected the prices of basic products, such as the price of commodities needed.

The fact that the oil price cuts have not yet contributed to the decline of market prices has prompted the government to discuss the issue Friday.

President Susilo Bambang Yudhoyono, who chaired the cabinet meeting, said he would study the effect on the diesel price declines in the real sector. He expressed concern that the fuel oil price reductions seems to be unable to lower the prices and the necessary transport fares.

The government in December last year cut the premium gasoline price twice RP6 of RP500, 000 per liter for RP5, 000 per liter and diesel prices RP5, 500 per liter of RP4, 800 per liter .

During the Friday meeting, which was also attended by the chairman of the Indonesian Chamber of Commerce and Industry (Kadin) MS Hidayat, the head of state asked the business community to be just what the prices of basic and necessary transport tariffs in the light of the decline in heating oil prices.

"The president has asked the business community to be fair to the public by lowering the prices and the necessary transport fares," Finance Minister Sri Mulyani said after the meeting.

The President requested the meeting Kadin Chief MS Hidayat to seriously consider reducing the price of oil and reflected in the prices of its products. Declines in oil prices should obviously have reduced the business community of the production costs.

Mulyani said all parties, the business community in particular, should be transparent and reliable to help achieve the Government's desire to have the necessary basic prices and freight rates in the country reduced.

"The government has lowered the price of heating oil and the company should have reduced the prices of other commodities as a result, without any excuse," said Sri Mulyani.

According to MS Hidayat, prices could be reduced by 10 percent if the government reduces the price of oil by RP500. He said that Kadin if the proposal was accepted and fuel oil prices were reduced, then there would be opportunities for prices of a number of things needed, and transportation fares to go to the bottom of about 10 per cent.

"I do not have the power to say that the government will announce a lower price, but if I look at his body language, it is likely that the government accepts the proposal of" Kadin, "Hidayat said after attending in the meeting, adding that the government would probably announce on 15 January 2009.

Kadin suggested that the government cut the subsidized price of gasoline and premium diesel fuel RP4, 500 per liter and RP4, 300 per liter respectively.

Vice President Jusuf Kalla said the government would announce a further reduction in prices of heating oil, but it does not mention any figures.

"God willing, the price will be cut again on 15 January. The government has pledged to ease the burden of people `s in line with the current world crude prices," said Vice President of a press conference.

Hidayat said that a reduction of approximately RP500 per liter of fuel oil prices following the decline in freight rates would maintain or even increase the population of the purchasing power in the current economic crisis.

Meanwhile, Transport Minister Jusman Syafii Djamal said public transport fares to decline by 10 percent if the government cut fuel prices in the middle of this month.

"The transport fares have already been reduced by about 3 to 6 percent as a result of reductions in premiums for gasoline and diesel oil prices in mid-December last year. If oil prices are down again, transmission rates can be cut by the father of about 10 percent, "the minister said.

He said President Yudhoyono had asked him about the possibility of reducing transport fares if the government cut gasoline and diesel oil prices.

Therefore, the minister called on the public transport owners to lower their prices shortly after the government cut the price of oil more fuel. "State-owned transport companies such as DAMRI for buses, SDEA for ferries, and PT KA for trains pioneered the reduction of transport fares," said the minister.

So far, the economy class fares between city bus can easily be reduced, but the mini-bus fares for the city (angkot) are difficult to decline because of the attitude of errant drivers.

"The drivers feel the direct impact of the rising prices of spare parts such as tires in Indonesia, which are relatively higher than those overseas," said the minister.

The government and the associations of vehicle owners are trying to find a way to provide incentives to lower prices of auto parts, including tires. (*)