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Keeping it Simple

Government Cuts a Hasty Retreat on Plans for Two-Tiered Price Increase for Gasoline. Expect Higher Gas Prices in May

(5/6/2013) Suara Pembaruan reports that the government is cutting a hasty retreat from plans to introduce a two-tiered price structure this May at gasoline pumps, changing their original plans to estalish lower prices for motorcycles and higher prices for four-wheeled vehicles.

The price hike is sought by the government in an effort to reduce the massive subsidy presently being absorbed by the State budget.

After the two-tiered pricing approach was widely criticized from many quarters of Indonesian society, the Government has reportedly decided to soon announce a single price for premium gas at the petro pumps.

The price, yet to be confirmed, will probably be a figure less than Rp. 6,500 (US$0.65) per liter to be charged to all vehicles for premium gasoline.
Jero Wacik, Indonesia’s Minister of Energy and Mineral Resources, said: “The possibility is that there will be a single price in accordance with the people’s wishes, perhaps a price below Rp. 6,500 per liter.”

Wacik said the government must raise the price of gasoline to reduce the burden of the fuel subsidy, but asked the public for time to properly consider the final decision.

Continuing, Wacik said: “The Government has listened to the opinions of the people. The public knew there were two levels of pricing being considered for the the price of fuel. Many of the public told us it would be difficult (to have two prices). We (the government) would also face difficulties. We considered all these opinions.”

Separately, the Coordinating Minister for the Economy, Hatta Rajasa, told the press that the Government is still studying introducing a single price increase for gasoline. Said Hatta: “We are studying one price (for gasoline). Actually, two-tiered pricing is the best solution, but operationally that would be very difficult.”

Many gas station operators in Indonesia have asked the government to use a single price system.