SBY's move to halt LPG price hikes politically motivated: Analysts

Desy Nurhayati and Mustaqim Adamrah ,  The Jakarta Post ,  Jakarta   |  Thu, 09/04/2008 10:17 AM  |  Headlines

President Susilo Bambang Yudhoyono on Wednesday ordered state oil and gas firm PT Pertamina to roll back its decision to raise liquefied petroleum gas (LPG) prices, calling it untimely and burdensome to the public -- in a move analysts deemed "populist".

Critics said the President's decision, while perhaps helpful, was clearly a politically driven one to gain public support ahead of next year's elections.

On August 25, Pertamina increased the prices of 12-kilogram and 50-kilogram LPG canisters, and announced it would progressively increase them every month until they reached market levels. Yudhoyono deemed the move "inappropriate and untimely", with the start of the Muslim fasting month of Ramadan only days away.

"Policies should not prompt new problems, especially when we are struggling to improve our economy. We should also consider the purchasing power of our people," the President said after a Cabinet meeting to discuss the issue.

State Minister for State-owned Enterprises Sofyan Djalil, Coordinating Minister for the Economy Sri Mulyani Indrawati and Energy and Mineral Resources Minister Purnomo Yusgiantoro also attended the meeting.

"We state, therefore, that there will be no increase in LPG prices, including planned monthly increases in 12-kilogram and 50-kilogram LPG canister prices," Yudhoyono said.

Pertamina said the raise was necessary to minimize its losses.

The price for 12-kilogram canisters was increased by 9.5 percent from Rp 63,000 to Rp 69,000, a rise of Rp 500 per kilogram from Rp 5,250 to Rp 5,750. The price for 50-kilogram canisters was raised from Rp 343,900 to Rp 362,750 per canister

Pertamina planned to increase the prices by Rp 500 per kg every month beginning October until they reached market levels.

The current market price of LPG is about Rp 11,400 per kg.

Sofyan said the government would not allow Pertamina to raise prices until at least after the 2009 elections.

Analysts were not impressed with Yudhoyono's decision.

"If the government is serious, why didn't it do the same thing when Pertamina began raising kerosene prices, which affects lower income people even more?" Ikrar Nusa Bakti of the Indonesian Institute of Sciences (LIPI) told The Jakarta Post.

"There are suggestions Yudhoyono's recent policies are populist and related to the 2009 elections."

Ikrar added the President's decision was "a little too late".

"Many families earn only Rp 1 million (US$108.79) a month, and they have to spend Rp 90,000 to Rp 100,000 every month on LPG. This is ridiculous," he said.

University of Indonesia political analyst Andrinof Chaniago said Yudhoyono could very well benefit from this action.

"Looking at it objectively, SBY was right to do this," he told the Post.

"But the moment was also favorable for him to gain political momentum."

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