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Fuel-price cuts to lower transportation fares by 3%
The government has said that the upcoming fuel-price cuts, to be effective on April 1, will lead to a nationwide decline in transportation fares as regional administrations are expected to circulate notices on the issue
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he government has said that the upcoming fuel-price cuts, to be effective on April 1, will lead to a nationwide decline in transportation fares as regional administrations are expected to circulate notices on the issue.
The government said it will slash the price of Premium gasoline and diesel fuel, which is mostly used by public transportation.
The premium prices will fall to Rp 6,450 (US$0.48) per liter from Rp 6,950 per liter, while diesel will drop to Rp 5,150 per liter from Rp 5,650 per liter. There is no change for the price of kerosene.
The press conference was attended by Cabinet Secretary Pramono Anung, Energy and Mineral Resources Minister Sudirman Said, Transportation Minister Ignasius Jonan and Pertamina president director Dwi Soetjipto.
During a limited Cabinet meeting prior to the press conference, President Joko 'Jokowi' Widodo said the cut in fuel prices should translate into a decline in transportation fares.
'It should happen. When fuel prices increase, transportation fees increase multiple times, but when fuel prices drop, nothing happens,' Jokowi said in his remarks during the Cabinet meeting.
Meanwhile, Minister Jonan said he would soon send letters to all regional heads regarding transportation fares decreasing.
He said an average 3 percent cut in transportation fares would be feasible across various transportation modes, namely ship, train, intercity transportation within a province, intercity transportation between provinces and city transportation.
'The fare reduction cannot take place all at once. It takes time for adjustment. Some have already sold tickets online and that cannot be reverted.'
Meanwhile, Sudirman said the government has taken into consideration the upcoming Ramadhan fasting month and holidays in June and July within the new fuel price calculation.
The government said it hopes to be able maintain the price drop during the next three months until the next fuel price review, citing low crude prices in the global market.
As of Wednesday, the price of West Texas Intermediate (WTI) stood at $38.84 per barrel, down 20.2 percent year-on-year (yoy), while Brent reached $39.32 per barrel, slumping 30.1 percent yoy.
Separately, economists contacted by The Jakarta Post said the reduction in fuel prices and transportation fares would not necessarily lead to a lower inflation rate.
'Every 10 percent drop in the premium price will lower inflation by 0.3 percent to 0.4 percent. Now that the premium will fall by 7 percent, the impact on inflation will be around 0.2 percent,' Bank Mandiri economist Andry Asmoro said.
He argued that food prices played more a role in determining inflation than fuel prices and transportation fares, and maintained Mandiri's projection of 4.5 percent inflation for 2016.
Standard Chartered Bank Indonesia economist Aldian Taloputra likewise said inflation would drop between 0.2 percent and 0.3 percent only after the new prices were implemented.
The result could immediately be seen in April, he said, adding that it might take Jonan three months to effectively lower transport fares.
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