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Fuel Prices Increase 28.7%

Government Tries to Address Shock of Fuel Cost Increases with Cash Payments to the Nation's Poor.

Bali News:
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The much dreaded and long awaited increase in fuel prices was introduced at midnight on Friday, May 23, 2008, across Indonesia. Fuel prices increased an average of 28.7% in a bold step to reduce the crippling fuel subsidies paid from the Indonesian State budget, lately made even more burdensome by soaring world crude oil prices.

The Hikes in Prices

The Minister of Energy and Natural Resources, Purnomo Yusgiantoro, announced that the kerosene used for cooking in many low-income households would increase 25% from Rp. 2,000 (US$0.217) to Rp. 2,500 (US$0.271) per liter; premium gasoline would increase 33% from its price of Rp. 4,500 (US$0.489) to Rp. 6,000 (US$0.652) per liter; and diesel fuel increasing 27.9% from its price of Rp. 4,300 (US$0.467) to Rp. 5,500 (US$0.597) per liter.

Higher Prices May Await

The press conference formally announcing the price increase was attended by a large number of Cabinet Ministers making a public show of support for the controversial fuel price hikes. With the world price of crude oil now moving past the US$135 per barrel mark, none of the Ministers in attendance were prepared to offer any guarantees that prices won't be increased again if the price of world oil continues to soar to higher levels.

The Situation in Bali

On the eve of the fuel price increase, long lines began to form at gas stations across Bali as consumers attempted to "fill up their tanks" before the higher prices came into effect at midnight. A high police presence was obvious at many gas pumps in an effort to help maintain public order.

Bali Post also reports that 12 fuel hoarders were apprehended on the eve of the increase. The hoarders taken into custody were attempting to stockpile amounts ranging from as little as 150 liters to as much as 1,000 liters of fuel.

The manager of distribution for the State Oil Company Pertamina in Bali, Nusra J. Simanjuntak, told the press that fuel supplies in Bali remain adequate in the face of current daily consumption of 1,600 tons of premium, 400 tons of diesel and 475 tons of kerosene.

Cash Fuel Relief Payments

In an effort to ease the pain of the substantial increase in fuel costs and address widespread public discontent, the Government will introduce Cash Fuel Relief Payments (BLT) in ten cities starting from Saturday morning, May 17, 2008. The ten initial cities included in the program are Jakarta, Surabaya, Bandung, Makassar, Medan, Banjarmasin, Kupang, Yogyakarta, Palembang and Semarang. It's is not clear when the cash subsidy will be introduced in Bali where many local legislators and political leaders have called for Bali's Governor to refuse to participate in the BLT system. The relief program has been criticized in Bali by those concerned that the program will be riddled with corruption and other who feel that a "welfare state mentality" will be created among the Island's poorest citizens.

Those members of society determined to be eligible for assistance will receive a BLT card that qualifies them for a Rp. 100,000 (US$10.90) monthly cash subsidy to help offset higher food and general living costs.

The Department of Finance has allocated Rp. 4.1 trillion (US$445,7 million) to cover the cost of BLT program for its initial three months with a targeted 13.6 million recipients of an estimated total of 19.1 million people eligible for relief. The cash payments will be made to the public via the national Post Office System.

Related Article

[Fuel Prices to Increase after May 23]

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