Finance Ministry: Fuel, LPG Price Hike Triggers No Inflation

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  • TEMPO.CO, Jakarta - Askolani, the Finance Ministry's director general for budgeting, said that subsidized fuel control would not have a substantial impact on the inflation rate. According to Askolani, the policy is rather related to the consumption volume than to price hike.

    "The aim of the [subsidized] fuel control is to make it more efficient," Askolani said on Monday, August 11, 2014 at the Coordinating Ministry for Economic Affairs' building.

    Askolani added that 12-Kilogram LPG price increase would not necessarily increase the inflation rate.

    "Based on our experiences, the impact of LPG [price increase] is less substantial than the fuel price hike. But we can't be too sure at the moment," he said.

    Askolani revealed that the government has yet discussed the LPG price hike, although Pertamina may have proposed it.

    Subsidized fuel control is the government policy to reduce the quota of certain fuel type in the revised state budget draft for 2014. The LPG price set by Pertamina is far lower than the base price.

    In 2009, Pertamina set the LPG price at Rp 5,850 (around US$0.5) per kilogram, despite its base price of Rp 10,787 (less than US$1). As a result, Pertamina had to bear Rp 22 trillion (around US$1.85 billion) of losses for over the last six years.