LPG Price Hike could Boost Inflation, says BPS

TEMPO.CO, Jakarta - Head of Central Bureau of Statistics (BPS) Suryamin has predicted that the price hike of liquefied petroleum gas (LPG) in 12-kilogram cylinders can drive up inflation rate at the end of this month.

"Gas price hike can result in inflation at the end of this month," Suryamin stated as quoted by Antara News.

However, he did not mention by how much the inflation rate is expected to increase.

"The increase in gas price will cause rise in the price of other goods. This is similar to fuel price hikes that boost inflation," Suryamin remarked.

He noted that the price increase of gas will have both direct and indirect impacts.

"The direct impact will be felt by household consumers who use gas in 12-kilogram cylinders to cook. The indirect impact will be felt by consumers in the food business sector that uses gas," Suryamin noted.

Deputy Minister for Energy and Mineral Resources Susilo Siswoutomo stated that the price of gas in 12-kilogram cylinders will be increased gradually until economically viable price is reached.

State-owned oil and gas firm Pertamina has raised the price of LPG in 12-kilogram cylinder by Rp1,500 per kilogram effective beginning at 00.00 hours local time on Wednesday, September 10, 2014.

Pertaminas Commercial and Marketing Director Hanung Budya told at a press conference on Wednesday that Pertamina had raised the price of LPG in 12-kilogram cylinders in an effort to offset losses suffered by the company in the LPG business.

He noted that at the consumer level, the price increase was between Rp21,000 and Rp22,000 per 12-kilogram cylinder because Pertamina had to bear additional transportation cost and retailers margin.

Before the price increase, the gas in 12-kilogram cylinder was sold to consumers at Rp100,000 per cylinder. With the recent price increase, gas in 12-kilogram cylinder will be sold to consumers at Rp120,000 per cylinder.

"The price hike is aimed at reducing business loss incurred worth Rp452 billion in the 12-kilogram cylinder category during 2014," Hanung explained.

Thus, the loss incurred, which was previously projected at Rp6.1 trillion, will be Rp5.7 trillion for 907 thousand tons of LPG consumption.

The loss incurred is still higher than the companys 2014 budget projection at Rp5.4 trillion, assuming Aramcos contract price of US$833 per ton at an exchange rate of Rp10.5 thousand per US dollar.

Based on the roadmap laid by Pertamina through a letter dated January 15, 2014, to the Minister of Energy and Mineral Resources and the Minister of State-owned Enterprises, the price hike of the 12-kilogram non-subsidized LPG cylinder will be carried out in stages.

As of July 1, 2014, Pertamina has planned to increase the price of LPG in the 12-kilogram cylinder category by Rp1,000 per kilogram.

Price will be raised by Rp1,500 per kilogram on January 1, 2015; July 1, 2015; January 1, 2016; and July 1, 2016.

After July 1, 2016, the LPG price is expected to reach its economies of scale at Rp11,944 per kilogram or Rp180,000 per 12-kilogram cylinder.

ANTARA