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Subsidized fuel prices to stay: Govt
The government will likely maintain the price of subsidized fuels this year despite concern that rising global oil prices will be a burden upon the state budget, Finance Minister Sri Mulyani Indrawati said
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he government will likely maintain the price of subsidized fuels this year despite concern that rising global oil prices will be a burden upon the state budget, Finance Minister Sri Mulyani Indrawati said.
“I am still comfortable with the current figure until the end of the year,” Mulyani said Thursday in a meeting with media representatives and analysts.
Crude oil for April delivery was down 14 cents to US$82.29 per barrel late Thursday afternoon on the New York Mercantile Exchange, AP reported. Crude prices have hovered at $80 per barrel this week after falling to $69 early last month.
The government has submitted to the House of Representatives a revision of the 2010 state budget, with the benchmark Indonesian Crude Price (ICP) reference being raised to $77 per barrel from $65.
The ICP is usually $3 to $5 cheaper than global oil prices.
The government is authorized to make an adjustment to the price of subsidized fuels when the average ICP price reaches 10 percent higher that the assumed price.
It means that the government is allowed to raise the price of subsidized fuels if the ICP rises above $84.7 per barrel.
Danareksa Research Institute Chief Researcher Purbaya Yudhi Sadewa said global oil prices would likely fluctuate between $60 and $80 per barrel throughout this year.
He predicted crude prices would not likely surpass $100 per barrel.
“If the economy grows, capital markets will follow suit. Speculators who buy commodities will eventually move to stock markets,” he said.
Standard Chartered Senior Economist Fauzi Ichsan said the government would likely raise the price of subsidized fuels only if global oil prices surpassed $100 per barrel.
In the revised 2010 state budget the government has raised the fuel subsidy by 30 percent to Rp 89.3 trillion (US$9.73 billion) from the previous Rp 68.7 trillion.
The figure almost doubled from Rp 45.04 trillion in realized fuel subsidy expenditure last year.
More subsidies are needed to protect households, whose consumption drives about 60 percent of the economy, Mulyani told foreign media on Tuesday night.
The government expects the economy to grow 5.5 percent this year, up from 4.5 percent in 2009.
Additional subsidies will result in the estimated budget deficit rising to Rp 129.8 trillion, or 2.1 percent of GDP, up from Rp 98 trillion earlier, or 1.6 percent of GDP.
The revised 2010 budget is awaiting House approval, while lawmakers say they may boycott Mulyani in talks on the revision of the budget since they have blamed her for the Bank Century bailout decision.
The House voted 325 to 212 votes on March 3, that the Century bailout which cost Rp 6.76 trillion involved legal violations. Mulyani and Vice President Boediono were blamed for problems arising because they were responsible for the bailout.
Both Purbaya and Fauzi said this friction between lawmakers and Mulyani would have a negative impact on investors’ confidence. “This friction is not good for Indonesia’s reputation on the international level,” said Fauzi.
Purbaya said the friction would hurt the economy and the people as a whole. “I suggest to the House, if they want to find a way to exercise their political powers, to not do so in a way that can hurt people’s interests,” he said.
“They should be more mature than they are being now,” he added.
