Mustaqim Adamrah, Jakarta – President Susilo Bambang Yudhoyono decided Monday to lower fuel and electricity prices before Indonesians go to the polls this year.
Yudhoyono also issued a policy to immediately force public transportation operators to slash fares and allow the public to directly enjoy the impact of a string of fuel price cuts.
Prices for subsidized Premium gasoline and diesel for private motorists will be cut by 10 percent to Rp 4,500 per liter, and by 6.25 percent to Rp 4,500 per liter, respectively, while subsidized kerosene prices remain unchanged at Rp 2,500 per liter. The new fuel price scheme, the third so far since December last year, will take effect on Jan. 15.
Yudhoyono said the policy was aimed at bolstering household consumption to keep the economy robust amid a deepening global economic crisis, "[The policy] will help sustain the people's purchasing power and prevent mass layoffs. These are the utmost outcomes the government wants to achieve," Yudhoyono said after a Cabinet meeting.
Yudhoyono's fuel price cut, the first ever taken by an Indonesian president, is seen by analysts as a short-term populist election gambit. Indonesians will pick legislators in April 9 and a president in July.
Acting Coordinating Minister for the Economy Sri Mulyani Indrawati promised consumers there would not be a fuel shortage ahead of the price cut as a result of losses that gas station owners would bear because of the price discrepancies.
"[Gas stations] will begin purchasing fuel at the new prices [on Monday night], but people will enjoy the new price effectively on Jan. 15," she said.
Mulyani was upbeat the cut would bring the January inflation rate to less than 0.53 percent. Bank Indonesia forecast infl ation to be between 5 and 7 percent this year, easing from 11.1 percent last year.
The government is struggling to ease inflation, which has become a key requirement for the central bank to slash its benchmark interest rate to help companies gain access to low-cost borrowing for expansion and to hire workers.
Fueled primarily by domestic consumption, Southeast Asia's largest economy expects to grow by between 4.5 and 5.5 percent this year – the highest in the region.
Indonesia's limited dependence on exports is likely to see it go almost unscathed through the global economic slump.
On Monday, Yudhoyono also lowered electricity rates for companies with power consumption of between 201 kilowatts and 30 megawatts, and those of over 31 megawatt.
Mulyani said industrial energy costs were expected to decline by an average of 8 percent, while energyintensive industries were expected to save 12 to 15 percent on energy costs. The rate cut will affect January billing.
For cuts in transportation fares, Yudhoyono said a policy issued by Transportation Minister Djusman Syafii Jamal would require intercity and interprovince transportation operators to reduce fares by 10 percent, effective Jan. 15.