RI fuel consumpiton may rise by 10%

By Ika Krismantari

The recent fuel prices increase has not hampered consumption, with full-year fuel consumption set to rise 10 percent on the back of a growing economy and a rising number of vehicles, an official says.

Luluk Sumiarso, director general of oil and gas at the Energy and Mineral Resources Ministry, said during a meeting with lawmakers Monday evening the nation’s fuel consumption would increase to 39.1 million kiloliters this year.

He said this was partly due to the growth in the economy, which is still targeted to grow at respectable levels of 6.2 percent to 6.4 percent despite the recent 28.6 percent increase in fuel prices.

Luluk said that with the economy growing, people were expected to buy more vehicles, which could lift up consumption, especially for gasoline.

“This year’s realization for gasoline will be a bit high since even after the increase people will still buy Premium gasoline rather than nonsubsidized Pertamax, because of the latter’s high price,” he said of Pertamina’s high-octane fuel product.

According to ministry simulations, the higher-than-expected fuel consumption would mostly come from Premium gasoline, which could increase by 14 percent from the initial estimate.

State oil and gas firm PT Pertamina has said that from January to April, fuel consumption reached 12.9 million kl, more than a third of the full-year quota.

Ahmad Faisal, Pertamina director for marketing and trading, said that consumption of Premium gasoline had reached 6.1 million kl in the first four months of this year from an estimate of 16.9 million kl, kerosene 2.9 million kl from an estimate of 7.5 million kl and diesel 3.7 million kl from an estimate of 10.9 million kl.

Downstream oil and gas regulator BPH Migas said that over the past five years the consumption of Premium gasoline had risen by 5 percent per year due mostly to the rapid increase in vehicles.

Finance Minister Sri Mulyani Indrawati said fuel subsidies could rise in line with the increase in consumption, and that the government would be able to cover subsidies as high as Rp 132.1 trillion (US$14.3 billion).

In a bid to keep the state budget in check, the government has been trying to control fuel consumption to stabilize the budget even as oil prices hover above $120 a barrel.

In addition to increasing the fuel prices, the government has embarked on a programs to replace kerosene with liquefied petroleum gas (LPG) and limit the sale of subsidized fuels with the distribution of “Smart Cards” to motorists and public transportation operators. (The Jakarta Post)

On High Alert

By Budi Setyarso

The government has raised the price of fuel, triggering protests everywhere. The Palace is worried that martyrs will fall, while the President has cancelled his trip to Italy.

PRESIDENT Susilo Bambang Yudhoyono was to have visited Rome next week to attend a World Food Security Ministerial Level Meeting. The meeting, organized by the Food and Agricultural Organization, will, among other topics, discuss the world food crisis. But the domestic crisis may well put an end to the President’s plans.

“The President’s trip to Italy, also to England, has been canceled,” said a Tempo source. Presidential spokesperson Dino Patti Djalal has not disputed the information, although he claims it is not a cancellation, because the planned trip to these countries was not publicized.

The cancellation is presumably related to the government’s decision to increase fuel prices. Announced by Coordinating Minister for the Economy Boediono in Jakarta on Friday last week, the new price of premium gasoline has risen to Rp6,000, diesel to Rp5,500 and kerosene to Rp2,500. An average increase of 28.7 percent.

This is the third price increase to take place during the administration of Susilo Bambang Yudhoyono and Vice President Jusuf Kalla. The government raised fuel prices on two previous occasions—on March 1, 2005 and October 1, 2005 (see table). Like previous occasions, the political temperature heated up in the lead up to the government making the decision. Thousands of demonstrators protesting the planned hikes took to the streets of Jakarta on Wednesday last week.

Demonstrators marched from the Hotel Indonesia roundabout to the Presidential Palace in Central Jakarta. Thousands of people from various age groups protested in the name of groups such as the Youth Movement Network, the Student Action Front, the Fishers & Farmers Awakening Front, the Indonesian Poor People’s Commission for Justice, the People’s Challenge Front and the Indonesian Poor People’s Union. The demonstration ended in chaos with police arresting scores of people.

A number of student groups also held demonstrations in front of the House of Representatives (DPR) building. This action also ended in chaos, with three protesters being injured. On late Friday afternoon—just prior to the announcement of the price increase—hundreds of University of Indonesia students gathered at the Pasar Minggu campus in South Jakarta. The students blocked the Jl. Pejaten Raya intersection and turned it into a speech forum.

Just before midnight, a small clash with the police occurred. But as dawn approached, police invaded the campus. “The police were forced to enter because the students pelted us with Molotov cocktails,” said National Police Headquarters spokesperson Insp. Gen. Abubakar Nataprawira.

The clash was unavoidable. The campus’ Faculty of Social & Political Science was severely damaged. Broken glass was scattered everywhere and drops of blood could be seen in some places. A car and a police motorbike were also damaged. “We will be consulting with lawyers to bring charges against the police,” said Hasto Atmodjo Surojo, the Dean of the Faculty of Social & Political Science. During the incident, 141 students were detained by police.

Similar protests—also involving significant numbers of people—were held in other cities over the last week. Several of these also ended in clashes, like in the South Sulawesi provincial capital of Makassar and the Central Java city of Yogyakarta. Protest actions are certain to continue now that the government finally announced the fuel price increases.

It is likely that the widespread street protests made Yudhoyono decide to stay at home. A Tempo source said the president was worried about the rising political heat when the price increases came into effect. “The President is worried that there will be martyrs, that demonstrators would be killed,” he said.

Ten years ago, the situation spiraled out of control after four University of Trisakti students were killed. The tense situation and political crisis that followed forced former President Suharto to relinquish power, which he had held for 32 years. This was the reason the Palace repeatedly warned security personnel on the ground to show restraint. Police were prohibited from carrying firearms when confronting demonstrators.

Secret units or intelligence personnel were also ‘infiltrated’ into the Palace security guard. The members of these units observed the activities of demonstrators up close. On Wednesday last week, when news spread that a demonstrator had been shot in front of the DPR building, these intelligence personnel followed the victim to the Pelni Hospital in the West Jakarta area of Petamburan. They were relieved to see that the protester—who had allegedly been seriously wounded—was able to take part in Friday prayers.

Budi Darma, the demonstrator who was reportedly shot, said that they were actually about to end their protest. The student from the University of Indonesia’s Faculty of Social & Political Science had already taken off his varsity jacket. But the atmosphere, however, quickly turned anarchic. Then an “officer with a brown beret” approached him. “He aimed a rifle at me,” he told Fery Firmansyah and Ismi Wahid from Tempo, “and I suddenly felt a very sharp and stinging pain.”

He claims to have been shot by a rubber bullet but has been unable to find the cartridge. The left side of his chest is bandaged. According to Adi Negoro, head of the faculty’s Student Council, a team of doctors has confirmed that there were no internal wounds on the body of his colleague. “There was just a three centimeter long bruise,” he said.

The President’s supporters are claiming that the actions opposing the fuel price hikes are politically motivated. Their aim, they say, is to bring down Yudhoyono’s popularity before the 2009 general elections. “A former minister is behind the demonstrations,” said National Intelligence Agency chief, Syamsir Siregar.

It is not difficult to guess who Syamsir is pointing the finger at—Rizal Ramli. The Coordinating Minister for the Economy in the Abdurrahman Wahid cabinet was indeed an activist who often took to the streets. But he denies using the student actions for his own ends. “The charge is an insult to the student’s intelligence,” he said.

Circles close to the Palace group Rizal in the same rank as former Indonesian Military Chief retired Gen. Wiranto who now leads the Hanura Party and Fuad Bawazier, the former Finance Minister who has also joined that party. This group has adopted the flag bearing the words the People’s Challenge Front (FRM).

In their protests, the FRM has raised the same issues as Wiranto: poverty. When they speaking at the Hotel Indonesia roundabout on Wednesday last week, activists from the group said that 40 million people in Indonesia are living in poverty and that there are 15 million people without jobs. This has been a central theme in advertisements placed by Wiranto’s team in various news media.

Wiranto, Rizal and Fuad all say they are not mobilizing the demonstrators, although Fuad does admit that they opposed the government’s decision to increase fuel prices from the start. The same demands, according to Fuad, have also been articulated by other student groups. “Without being mobilized, many people took part in the protests,” said the former Finance Minister in Suharto’s last cabinet.

The fuel price increase is an effective weapon to attack the government. The Indonesian Democratic Party of Struggle (PDI-P) and the Justice & Prosperity Party (PKS) have both said they will launch a motion against it in the DPR. “The government should seek other options instead of increasing fuel prices,” said Mahfudz Siddiq, head of the PKS Faction in the DPR. Similar views were expressed by PDI-P executive, Maruarar Sirait.

In fact, the Law on the 2008 Revised State Budget provides a legal basis for the government to increase the price of subsidized fuel. Article 14 states that this can be done if there are significant changes. In the clarification section, significant changes assume the average price of Indonesian crude oil over a period of one year is above US$100 per barrel, which would result in an excessive subsidy burden on the government. Clearly, such conditions have been met.

It appears, however, that the article is being conveniently ignored by many political parties, whose factions ipso facto signed the law. “Usually, in the lead up to general elections, many parties seek the people’s support,” said one government official. This is the reason they will still plan to call for a motion against it in the DPR.

The government’s decision also threatens to undermine Yudhoyono’s popularity. Three years ago, when the government increased fuel prices two-fold, the popularity of Indonesia’s fourth president was relatively stable. Based on the results of a survey by the Indonesian Survey Institute at the time, his popularity dropped by only 4 percent from an initial 69 percent approval rating.

This initial support base has now declined quite drastically to only 53 percent—although this figure is still far higher than that of other political figures mentioned as presidential candidates. According to a survey conducted in January, the popularity of Yudhoyono’s nearest rival, Megawati Sukarnoputri, was still around the 32 percent mark.

According to presidential spokesperson Andi Mallarangeng, President Yudhoyono chose this unpopular policy for the sake of securing the country. “It is better to sacrifice [one’s] popularity rather than the national interest,” he said. But he is convinced that the fuel price increase will not affect his boss’ popularity in the general elections next year.

Over the coming weeks, Yudhoyono’s political opponents will continue trying to erode his popularity. The President, it seems, will have to stay in Jakarta for a while longer, and forget about Italy for the moment.

Oil Price Hike*

*) On March 1, 2002, fuel prices were adjusted according to market prices up until the end of the Megawati administration.

	Premium	Solar	Minyak tanah
16/6/01	1,450	900	510
17/1/02	1,550	1,150	600
1/1/05	1,810	1,650	600
1/3/05	2,400	2,100	700
1/10/05	4,500	4,300	2,000
23/5/08	6,000	5,500	2,500

*) From various sources
(Tempo Interaktif)

Fuel up 28.7% as aid plans begin

By Aditya Suharmoko and Abdul Khalik

After weeks of uncertainty, the government on Friday raised subsidized fuel prices by an average of 28.7 percent to help salvage the state budget, which has been severely strained by high-flying crude oil prices.

Energy and Mineral Resources Minister Purnomo Yusgiantoro told a press conference that per-liter Premium gasoline was being increased from Rp 4,500 (48 U.S. cents) to Rp 6,000, diesel from Rp 4,300 to Rp 5,500 and kerosene from Rp 2,000 to Rp 2,500.

“The government needed to adjust the fuel prices considering the rise in global oil prices,” said Purnomo, referring to oil prices that are currently hovering at $130 per barrel.

Also attending the briefing were Finance Minister Sri Mulyani Indrawati, Industry Minister Fahmi Idris, State Minister for National Development Planning Paskah Suzetta, Trade Minister Mari Elka Pangestu, Coordinating Minister for People’s Welfare Aburizal Bakrie, Transportation Minister Jusman Syafii Djamal, Social Affairs Minister Bachtiar Chamsyah, Home Affairs Minister Mardiyanto and Communications and Information Minister Muhammad Nuh.

The last fuel price increases took place in October 2005.

To help mitigate the move’s impact on the poor, the government is providing cash transfers of Rp 100,000 per month until the end of 2008 and 15 kilograms of cheap rice to poor households, Aburizal said.

According to the Central Statistics Agency, the country has 19.1 million poor households nationwide.

The cash transfer aid can be obtained beginning May 24 from post offices, Bachtiar said. He said people were advised not be rushed in obtaining the money as “the money can be obtained until the end of the year”.

Aburizal also said the government would provide a one-time payment of Rp 150,000 to low-ranking civil servants, honorary workers and military and police officers, to be disbursed in July.

In addition, up to Rp 14 trillion has been allocated to help people in rural areas maintain their small businesses.

Earlier in the day, governors said they supported the fuel price increases and were ready to help monitor the distribution of the direct cash aid in their provinces.

President Susilo Bambang Yudhoyono and the governors held a meeting before the fuel policy’s announcement.

Under the cash program, each household has to secure a card to be eligible for the disbursement.

“For Jakarta, we are ready to ensure that the cash program reaches the designated people safely,” Jakarta Governor Fauzi Bowo said after the meeting.

BPS chairman Rusman Heriawan said the fuel price increases would add 0.5 percent to May inflation.

“Calculating the low inflation in May 2007 and last month’s year-on-year inflation of 8.96 percent, inflation in May will likely reach above 10 percent,” said Rusman. (The Jakarta Post)

Pertamina puts limits on fuel purchases

By Ika Krismantari

State oil and gas company PT Pertamina has put limits on fuel transactions at gas stations in Jakarta and several other cities in the country, in response to panic buying triggered by the government’s plan to raise fuel prices.

According to a letter distributed to gas stations in Jakarta, Pertamina, starting Friday, will limit gasoline purchases for private cars to Rp 65,000 (US$7.06), public transportation vehicles Rp 100,000 and motorcycles Rp 15,000.

The letter states that similar limits apply for the purchase of diesel fuel. It is signed by Wahyudin Akbar, the general manager of Pertamina for fuel retail marketing in Jakarta and West Java.

Djaelani Sutomo, Pertamina vice president for fuel retail marketing, confirmed the measure, saying a similar letter was distributed to gas stations in other areas known to be prone to excessive fuel consumption, such as many cities in Kalimantan and Java.

He did not name specific cities.

“We are doing this to control consumption, which has jumped significantly since the government announced its plan to raise domestic fuel prices,” he said.

The government’s announcement was greeted by panic buying, with customers buying fuels in large amounts in many parts of the country, pushing up fuel consumption by an average of 15 percent over the past two weeks.

In East Java, consumption has grown by 40 percent in the last two weeks, in Sumatra by 15 percent and in Jakarta by 5 to 15 percent.

There has also been an increase in fuel smuggling and hoarding, triggered by the huge gap between the market and subsidized prices for fuel.

Asked when Pertamina would lift the purchase limits, Djaelani they might not be removed.

“We want to make sure that we meet the national quota of 35.5 million kiloliters (kl) set for this year,” Djaelani said.

Earlier in the day, Pertamina president director Ari Sumarno told a press briefing every gas station in Jakarta would be given an additional fuel supply of 5 percent in response to rising public demand.

“The policy is taken with a consideration that after the fuel hike, demand will decline,” he said.

The 35.5 million kiloliter allocation comprises 16.9 million kiloliters of gasoline, 10.9 million kl of diesel fuel and 7.5 million kl of kerosene.

In the 2008 budget, the government has allocated fuel subsidy spending of Rp 126.8 trillion, or about 12 percent of the government’s total expenditures.

Aside from raising fuel prices, the government also plans to limit the purchase of subsidized fuels through the so-called Smart Card program, to be put into place sometime in September.

Downstream oil and gas regulator BPH Migas said the plan would target private vehicles and public transportation operators. (The Jakarta Post)

Lawmakers to summon SBY over fuel price plan

The House of Representatives plans to summon President Susilo Bambang Yudhoyono to explain his plan to raise fuel prices, as the Regional Representatives Council (DPD) unanimously rejected the planned increases.

House Deputy Speaker Muhaimin Iskandar said the legislature would ask the President to provide details about the government’s plan to increase fuel prices.

“The House has agreed to invite the government, including the President, for a consultation meeting in which the government must explain to us in detail its plan for the fuel price hike,” said Muhaimin after presiding over a House consultative body meeting here Thursday.

The government plans to raise fuel prices to cap fuel subsidies and protect the state budget in the face of soaring global crude oil prices. This plan evoked criticism from lawmakers Monday during a plenary meeting to mark the House’s opening of the new legislative period. The House has yet to declare its institutional stance on the issue.

“The House, through consultation with the government, wants to understand precisely the target and design of the price hike, so we will know how to respond to this plan,” Muhaimin said.

He added that this consultation was also important for informing the public about the government’s plan.

Muhaimin said the meeting would be attended by House executives and heads of House factions, commissions and bodies.

He said the exact schedule for the meeting would depend on the President. “We expect that we can have this meeting as soon as possible.”

Earlier Thursday, the Regional Representatives Council, in a plenary session, rejected the proposed fuel price increases.

“Our concrete stance is the government must undertake other options before raising fuel prices,” said Council Speaker Ginandjar Kartasasmita after the session.

“Now is not the right time for the government to raise fuel prices because we are facing many economic pressures, including poverty and soaring food prices. Increasing fuel prices during this crisis will have a great impact on our industries and employment opportunities,” he said.

Ginandjar, a former chief minister for the economy, said efforts to secure the state budget must go together with measures to protect the country’s economy.

He said any adjustments to the economic structure, including the easing of fuel subsidies, could not be done in the midst of the economic downturn.

“The government should maintain the oil subsidy while it continues to take measures to restore our economy. This would be a better policy for the long-term viability of our economy,” Ginandjar said.

He added that the Council did not want the government to maintain the fuel subsidies permanently.

“It’s fine if one day the government adopts the actual cost for determining fuel prices, but not now when the people are under pressure,” he said.

He said Indonesia should be taking advantage of soaring global oil prices by increasing domestic oil production and reducing domestic oil consumption. He added that the government must also step up efforts to find alternative energy sources.

He said the Council would send a letter explaining its fuel price stance to the President later Thursday. (The Jakarta Post)

SBY foes behind fuel protests, says intel chief

By Abdul Khalik

Widespread street protests against the plan to raise fuel prices were masterminded by retired ministers and officials, State Intelligence Agency (BIN) chief Syamsir Siregar said Wednesday.

“Don’t ask questions about it because it is clear that some people have used the demonstrations (for their own agendas). Former ministers and officials are behind the protests,” he told reporters before a Cabinet meeting at the Presidential Office.

His comment quickly drew strong criticism from lawmakers and former president Abdurrahman “Gus Dur” Wahid, who is chief patron of the National Awakening Party (PKB), which is opposed to the planned fuel price rise.

“The BIN’s purpose is to defend the government. They are paid by the government, so they defend the President. Therefore, they are not sensitive to the people’s demands,” Gus Dur said as quoted by detik.com.

Lawmaker Yusron Ihza Mahendra, the younger brother of former state secretary Yusril Ihza Mahendra who was removed from President Susilo Bambang Yudhoyono’s Cabinet, also criticized the plan.

Yusron said given the mounting fuel rise protests, the BIN chief should not have made a statement that could make the situation worse.

“Don’t say this action (the protests) was masterminded (by others). State officials shouldn’t accuse each other,” he said.

Syamsir expressed hope people would understand the government’s decision to raise oil prices, saying widespread protests would pose a security threat to the country.

“But we have to face it. We need to speak to the public so they can understand why we have to take this option,” he said.

Thousands of students from the nationwide Student Executive Body (BEM) rallied Monday outside the State Palace, asking the government to cancel the plan.

They also demanded the president continue to pursue a reform agenda, including the nationalization of state assets from foreign companies and the fight against corruption.

Similar rallies also took place in several provinces across the country, while smaller protests were held in regions on Tuesday and Wednesday.

BEM coordinators threatened to stage a much larger rally next week if their demands were not met.

National Police chief Gen. Sutanto said Wednesday it was possible the demonstrations were being held by groups that wanted to see instability before and after the government announced the oil price rise plan.

He said he hoped demonstrations would not turn to chaos and anarchy, appealing to all parties to understand the government’s decision.

Syamsir also dismissed an accusation from lawmaker Ade Daud Nasution of the Golkar Party that the BIN chief was backing tycoon Sjamsul Nursalim, a corruption suspect in a Bank Indonesia liquidity assistance (BLBI) case.

“No. It is not true. I will take legal action. I am now consulting with my lawyers. Saying sorry is not enough. I guess we don’t have to be a thug when facing a thug,” he said.

Sjamsul, who has fled abroad, has been accused of embezzling trillions of rupiah from BLBI funds. (The Jakarta Post)

Govt may up fuel prices in June

By Abdul Khalik and Rendi A. Witular

The government is exploring the possibility of raising fuel prices in June by an average of 28.7 percent in response to skyrocketing fuel subsidies, which many fear may undermine the state budget.

A lawmaker from the House of Representatives’ budget committee and a businessman close to President Susilo Bambang Yudhoyono told The Jakarta Post on Tuesday that all key economics ministers had approved the plan.

“It’s the President’s call now to lay it on the table,” the lawmaker said, adding the President’s fear of losing popularity ahead of next year’s presidential election was the main reason behind the uncertainty in fuel prices.

Under a proposal that will be discussed further by the President and the Indonesian Chamber of Commerce and Industry (Kadin) next month, the price of premium gasoline would be raised to Rp 6,000 (65 U.S. cents) per liter from Rp 4,500.

The price of diesel would be set at Rp 5,500 per liter, up from the current Rp 4,300, while kerosene will be raised to Rp 2,500 from Rp 2,000.

If fuel prices were raised, it would allow the government to save Rp 25 trillion in subsidies, according to the proposal.

Under the new oil price assumption in the revised state budget, fuel subsidies rose from Rp 42 trillion to Rp 126.82 trillion, about 12 percent of the government’s Rp 987.48 trillion total spending.

The new scheme is based on an estimate the Indonesian Crude Price (ICP) — the country’s benchmark oil price — will stand at an average
of US$95 a barrel for the budget year.

The average ICP price during the first quarter of the year was $103.10 a barrel, while fuel consumption reached 27 percent of this year’s 35.5 million kiloliter allocation.

The proposal also includes a new mechanism for a direct cash distribution scheme to help cushion low-income Indonesians from the impact of rising fuel prices, which would likely trigger a rise in the prices of other products.

“Some Rp 11.5 trillion of the total money saved from the fuel subsidies would be given directly to the poor,” said the lawmaker.

The proposal also includes an assumption of a higher central bank benchmark interest rate at 8.5 percent from the current 8 percent, and a lower economic growth target of 6 percent from the current forecast of 6.4 percent.

“Vice President Jusuf Kalla has already approved the proposal. He will lead some key economics ministers and business representatives to discuss it with the President next month,” the businessman said.

Finance Minister Sri Mulyani Indrawati and Energy and Mineral Resources Minister Purnomo Yusgiantoro acknowledged the proposal, saying it was one of the government’s options to address the growing fuel subsidies.

“It (the proposal) is similar to the story conveyed during the revision of the state budget. We will look at all the scenarios to help the state budget, and at the same time reduce negative impacts on the public,” Mulyani told the Post.

President Yudhoyono has received pressure from the business community to raise fuel prices in a bid to ensure fiscal sustainability.

Analysts fear that if fiscal sustainability is not ensured, it could endanger the country’s sovereign risk, which would eventually make overseas lending expensive and foreign-direct investment riskier.

Kadin officials and a group of local businesspeople renewed calls Tuesday for President Yudhoyono immediately to raise fuel prices to help ease speculation in the financial market.

“The market is now speculating on the sustainability of the state budget. This will not be good for businesses in trying to accurately formulate business plans. The government should send a signal of certainty,” said Kadin chairman Mohamad S. Hidayat. (The Jakarta Post)