Fuel Price Hike for Infrastructure Development : VP

         Jakarta (Antara Bali) - The government has increased the price of fuel (BBM)  to build Indonesia's infrastructure, Vice President Jusuf Kalla remarked.

       "Indonesia wants to build schools, hospitals and roads. If there is not enough money, how to build schools, hospitals and roads," Jusuf Kalla said here on Sunday.

        The fund which is allocated for fuel subsidies previously, it can be transferred for infrastructure constructions.

        Earlier, state-owned oil and gas company Pertamina had said the market price of premium gasoline during the January to March period had experienced an average increase of 17 percent.

        Communications Deputy President of Pertamina Wianda Pusponegoro said on Saturday that the basic price of diesel oil also saw a hike of about 13 percent during the same period.

        "The increase has impacted the prices of the two types of fuels at home. For that, an adjustment needed to be made in the prices of premium gasoline and diesel oil fuels," she said.

        The Pertamina official said the increase in the prices of the two types of fuels took place due to two factors.

        The first factor was that during the January to March period, the global gasoline price index in terms of the U.S. dollar jumped 13 percent, while that for diesel oil was up by 9 percent.

        She said the spike took place due to the U.S. dollar's value against the rupiah increasing by 3.4 percent.

        As of March 28, the government raised the price of premium gasoline from Rp6,800 to Rp7,300 per liter for regions outside Java, Madura and Bali, and from Rp6,900 to Rp7,400 for regions in Java, Madura and Bali.¿
    The government boosted the price of subsidized diesel oil from Rp6,400 per liter to Rp6,900 per liter, both for regions inside and outside Jakarta, Madura and Bali.

        Winda admitted that the increase in the prices of the two types of fuels was not in accordance with their economic viability values.

        "The economic viability could be achieved if the market price index also declines," she added.

        The government had also raised the price of premium gasoline for regions outside Java, Madura and Bali from Rp6,600 per liter to Rp6,800 per liter effective as of March 1.

        Meanwhile, the price of premium gasoline for regions inside Java, Madura and Bali was also raised by Rp200 per liter from Rp 6,700 to Rp6,900 per liter as of March 1.

        Based on a Presidential Decision, premium gasoline is no longer subsidized.

        Meanwhile, the fluctuations in the price of fuel oil (BBM) will weaken the purchasing power of people in Indonesia, an economic observer from the Sultan Ageng Tirtayasa University (Untirta), Dahnil Anzar, said on Saturday.

        "Rising fuel prices will weaken the purchasing power of the people and result in the number of people living in poverty also increasing. The prices of goods and commodities will also go up," he said, adding that growth in the cost of living would make basic commodities even more unaffordable for the poor.

        However, when fuel prices go down, the prices of basic commodities will not decline automatically.

        "Such a condition would destabilize the market, especially at this level of certainty, frequent fluctuations will lead price uncertainty in prices in the market," he affirmed.

        Thus, Dahnil noted, with rising fuel prices, moral hazards, such as fraud and manipulation would also increase. The prices of transportation and logistics services would also rise. (WDY)