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Logistics costs stung by fuel price hike, shortages
Tariffs for goods transportation are projected to increase by a minimum of 20 to 25 percent, as fuel composes around 40 to 60 percent of logistics costs.
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Trucks line up to refuel using subsidized Solar brand fuel in a Pertamina gas station in Palapa, Padangpariaman Regency, West Sumatra on March 23. The lines developed as drivers were worried after hearing fuel was running out. (Antara/Iggoy el Fitra)
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upply chains across the country will face significant hurdles in sustaining operations as the fuel price hike ramps up logistics costs, raising the question of whether higher distribution prices would be transmitted to consumers.
According to Indonesian Logistics and Forwarders Association (ILFA) predictions, tariffs for goods transportation would increase by a minimum of 20 to 25 percent, as fuel composes around 40 to 60 percent of logistics costs.
Subsidized and a number of unsubsidized fuel prices were raised by the government by around 30 percent on Sept. 3 due to the heavy burden on the state budget, as oil prices had been increasing higher than projected.
In the first and second quarter of this year, the transportation and warehousing sector posted the largest yearly growth in the overall economy, up by 15.79 and 21.27 percent, respectively.
"The majority of logistics players [firms] use subsidized fuel because of the high market demand for low logistics costs," ILFA chairperson Yukki Nugrahawan Hanafi told The Jakarta Post on Monday.
Read also: Subsidized fuel price hike may put Indonesia at risk of stagflation
Although conceding that logistics firms had no other choice but to accept rising fuel prices, Yukki asked the government to maintain the supply of fuel as he had heard reports of scarcity in several gas stations.
