Christine T. Tjandraningsih, Jakarta – The Indonesian government Monday announced an increase in public transportation fares, only a few hours after it announced price hikes for fuel and electricity in accordance with an International Monetary Fund (IMF) recommendation to reduce government subsidies for the two commodities.
The increases cover bus, train and ship transportation fares with an average increase of 65.61%, Transportation Minister Giri Suseno Hadihardjono said after meeting with President Suharto.
According to Giri, the new fares will be effective Tuesday. The highest increase of 100.72% will be imposed on economy-class train fares, while economy-class inter-city bus fares will rise by 50 %.
Fares for regular buses and minibuses, which are used daily by most commuters, will be raised by 66.67% and 50% respectively – from 300 rupiahs (about 4 US cents) to 500 rupiahs for buses and from 400 rupiahs to 600 rupiahs for minibuses. "Fares for students (for regular buses and minibuses) will remain at 100 rupiahs, while the fares of air-conditioned buses will be decided by the owners of each bus company," Giri told reporters, adding that taxi fares will be determined by provincial governors.
Fares for diesel-powered trains will be raised 72.96%, while ship fares will be raised 53.33%.
The decision to increase the public transportation fares followed an earlier government decision to increase fuel prices by an average of 47%, effective from Tuesday, and electricity prices by 60% in three stages, starting this month.
Minister of Mines and Energy Kuntoro Mangkusubroto acknowledged the price hikes will be a hardship for the public, but said the decision was "the best" from a list of "hard and bitter" choices.
He told reporters that the government will "try to protect the low-income class and those who have been most affected by the impact of the economic crisis... through a cross-subsidy system either in fuel prices or in electricity fees."
Kuntoro announced an average increase of 47% in fuel prices, of which he said the largest portion will be borne by the affluent.
He said the highest increase – 71.43% – will be imposed on "premium", a kind of gasoline that is used by luxury cars, causing the price per liter to rise from 700 rupiahs to 1,200 rupiahs.
Kuntoro said last month that the wealthy would buy the more expensive premium "to subsidize kerosene customers who are mostly poor people." The price per liter of kerosene will be raised by only 25 %, to 350 rupiahs from 280 rupiahs, Kuntoro said Monday.
Meanwhile, according to Kuntoro, electricity fees will be increased by an average of 20% in May, 20% in August and 20% in November. He said that if fuel and electricity prices are not increased, the government's subsidies for both commodities will reach 27.54 trillion rupiahs, – 11.37 trillion rupiahs for electricity and 16.17 trillion rupiahs for fuel.
The government has attributed the huge subsidies to the sharp fall of the rupiah, the country's currency, against the US dollar, rather than to the inefficient operations of the state electricity company PLN and the state oil and gas company Pertamina.
Kuntoro said that last week operations of both are relatively efficient. "As the minister of mines and energy, I have the task of making the companies efficient and preventing their inefficiency from contributing to the fuel and electricity price increases," he said.
The price increases are expected to boost the country's inflation rate, but Kuntoro did not disclose the estimated inflation rate at the Monday press conference.
When the government last raised fuel prices in January 1993, the country's monthly inflation rate after the increase in fuel prices rose to 2.3%, from 1.5% in the preceding month.
In a recent agreement reached between the government and the IMF, Indonesia has promised that "subsidies will be substantially scaled down by Oct. 1" to cover the state budgetary position, which has come under severe pressure as a result of poor economic activity.