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OIL PRICE HIKES TRIGGER STRIKE BY DRIVERS OF PUBLIC TRANSPORT VEHICLES.

The government finally raised the oil fuel (BBM) prices on January 16, 2001. The prices of premium gasoline, automotive diesel oil (ADO), kerosene were raised by 30.1% on the average. The new chief economics minister Burhanuddin Abdullah also announced that the prices of industrial diesel oil (IDO) and fuel oil will be let to be dictated by the market. The increase rate was as suggested by the House of Representatives.

Burhanuddin said the price rise was decided following the completion of a review of the 2001 state budget between the government and the House of Representatives. The increase was aimed at reducing subsidies and deficit in the state budget. Burhanuddin said the government knew that the decision was unpopular but it had to be taken for a bigger national interest.

In order not to burden the people further the government pledged not to raise the bus transport fares in urban area, Jabotabek railway transport tariff and ferry fares. The announcement that the government and the transport association (Organda) had agreed not to raise transport fare had triggered big strike in the West Java capital of Bandung launched by drivers of public transport vehicles.
Table - 1

Oil and new prices of BBM

(Rp/liter)

 Types Oil prices New prices

Premium gasoline 1,150 1,450
ADO 600 900
Kerosene 350 400
IDO (*) 1,250(**)
Fuel oil (*) 945(**)

(*) 50% of international price; (**) June position

Source: Data Consult



Without subsidy the fuel subsidy will reach Rp 60 trillion this year or larger than previous projection of Rp 41.3 trillion in the 2001 state budget before it was revised. The revision reduced the deficit to Rp 53.8 trillion.

The subsidy policy so far was considered not to help the low income people as in fact people with higher income benefited more from the policy. The subsidy has also encouraged smuggling of fuels abroad.

In order to compensate for the subsidy cut, the government has set aside Rp 2.2 trillion in a new subsidy available for the programs of people's education, health care, rice special market operation and public transport service/city transport, drinking water, small and medium scale capital and empowerment of coastal community.
Table - 2

BBM price at present

(Rp/liter)

 Type Subsidiary price Market price(*)

Premium gasoline 1,450 1,950
ADO 600 1,990
Kerosene 600 2,150
IDO 1,250(**) 1,940
Fuel Oil 945(**) 1,540

(*) Assumption that the market prices are the same as in April'01

(**) Position in June, 2001

Source: Data Consult



BBM in industrial sector

Based on a presidential decree No.45/2001 on April 1, 2001, the prices for five types of BBM - premium gasoline, ADO, kerosene, DO and fuel oil for industrial sector and shipping companies, were based on the international prices. The prices of BBM for household consumption, small businesses, land/ferry transport vehicles and state-owned electric utility PLN were unchanged. Under the new regulation, the selling prices of BBM for the sector of industry, fishing ships bunkers, tankers of barges of fishing ships were set at 50% of international prices. The prices of BBM for the mining sector, foreign fishing ships and foreign ships are the same as the international prices. The prices were set by Pertamina every month. The prices do not include the 10% value added tax.

The price disparity had caused scarcity in the supply of BBM for public transport vehicles in a number of large cities forcing Pertamina to rush supply of BBM to gas stations. The scarcity in the supply was believed to have been caused by price difference that encouraged illegal selling of cheap BBM to industrial consumers.
Table - 3

BBM prices for industrial consumers and ships April 1, 2001

(Rp/liter)

 Type 50% from Market price
 market price

Premium gasoline (*) 1,950
ADO 1,080 2,150
Kerosene 990 1,990
IDO 970 1,940
Fuel Oil 770 1,540

(*) Rp 1.150 (President decree 45/2001)

Price before VAT 10%

Source: Pertamina



The increase in the BBM prices for the industrial sector has pushed up the price of industrial products. Earlier the prices of manufactured food and beverage products were already raised. The prices of tire increased 3.5% as a result of the BBM price hikes.
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Comment:OIL PRICE HIKES TRIGGER STRIKE BY DRIVERS OF PUBLIC TRANSPORT VEHICLES.
Publication:Indonesian Commercial Newsletter
Article Type:Brief Article
Geographic Code:9INDO
Date:Jun 26, 2001
Words:707
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