Raras Cahyafitri and Ina Parlina, Jakarta – On government orders, Pertamina is canceling plans to hike non-subsidized fuel prices, raising questions on the state-owned oil company's independence.

According to Energy and Mineral Resources Minister Sudirman Said the government asked Pertamina, which is free to set prices for non-subsidized products, to drop its plan to respond to public complaints.

"Pertamina's early announcement has confused people. In the future, we need to be more resolute in stressing the difference between subsidized and non-subsidized fuel," Sudirman told reporters on Friday.

News broke following the circulation of an internal Pertamina announcement that said the price would increase for non-subsidized fuels, such as Pertamax, Pertamax Plus and Pertamina Dex.

The document also said diesel fuel prices would increase to Rp 9,200 (70 US cents) per liter, although the subsidized diesel fuel price was set for Rp 6,900. Following complaints, Pertamina announced late Thursday that it cancelled its plan to increase prices.

President Joko "Jokowi" Widodo has been holding firm to a potentially unpopular promise to raise fuel prices to reduce subsidies and boost funds for infrastructure development.

As the global oil prices plummeted this year, the government overhauled its fuel subsidy policy, removing the subsidy for Premium while capping the diesel fuel subsidy at Rp 1,000 per liter. Prices are regularly adjusted to match exchange rate and global oil price changes.

As the global oil price inched higher in recent months, the government increased premium and subsidized diesel fuel prices. However, sales prices are much lower than market prices, forcing Pertamina to bear the difference.

For example, the May price for premium was set at Rp 7,300 per liter, while the market price is over Rp 8,000. Meanwhile, subsidized diesel fuel was set at Rp 6,900 per liter, while the market price was around Rp 9,200.

Blocking Pertamina from increasing the non-subsidized fuel prices would likely lead to further losses for the firm, critics have said. Pertamina usually adjusts the price of non-subsidized fuel, such as the RON 92 gasoline product Pertamax, every two weeks. The chairman of the Association of Fuel Station Owners (Hiswana Migas), Eri Purnomohadi, criticized the government's move.

"The government shouldn't make a big deal out of this, because this is related to non-subsidized products. If there is any misunderstanding, they only have to make it clear but not by cancelling the corporate action," Eri said.

He said that consumers of non-subsidized products were mostly urban citizens with higher incomes, meaning that price increases were unlikely to affect low-income people, who used subsidized fuel.

"This has created uncertainty and distrust of the government. Pertamina is a price setter, so this will affect other distributors such as Shell and Total," he said. Later on Friday at the State Palace, Sudirman said the government was currently looking for the most appropriate time to make the announcement.

"The government keeps paying attention to the oil prices and is currently studying the pattern of the oil and fuel price adjustments so that it won't create problems for the public," he said.

Source: http://www.thejakartapost.com/news/2015/05/17/govt-nixes-non-subsidized-fuel-price-hike.html