Fuel Price Hikes To Boost Economic Growth

Jakarta, April 24 (Antara) - The government`s plan to raise subsidized fuel prices and reduce subsidy can boost economic growth if the fund that is cut from the subsidy is used to develop infrastructure, a legislator said. "The increase in the price of subsidized premium gasoline for private cars will reduce subsidy and if the fund obtained from the subsidy reduction is used for infrastructure development, it will generate economic growth," Mohammad Hatta, a member of Commission XI of the House of Representatives (DPR), said here on Wednesday. Mohammad who is a politician of the National Mandate Party (PAN), said that the government`s policy to introduce a two subsidized fuel pricing system would have only small impact on inflation. Fuel is only a small component that generates inflation. "Fuel is only a small factor among the components that boost inflation. There are many other factors. So, I think, the policy to raise the price of subsidized fuel will only have a small impact on inflation," he said. He said that the people actually have the purchasing power to pay the price of gasoline at Rp9,000 per liter. The economic price of gasoline is estimated at about Rp9,500 per liter. The government has so far provided a subsidy of Rp5,000 per liter, selling it at Rp4,500 per liter both for private and public transportation vehicles. However, the government is planning next month to introduce a two pricing system for subsidized fuel, namely Rp4,500 per liter for public transportation vehicles and motorbikes and Rp6,500 per liter for private cars. Mohammad said that the government should ascertain and decide when the price would be effective and how much the value of the increase. "The increased price value and the timing of its implementation need to be made public to prevent speculative buying that can have negative impact," he said. Earlier, Acting Chief of the Finance Ministry`s Fiscal Policy Agency Bambang Brodjonegoro said that the price increase of fuel oil would have positive impact on the quality of the country`s economic growth. "If the policy (of raising subsidized fuel oil price) is adopted it will have positive effect on the growth and good influence on macro economy," he said. Bambang predicted that the global economic condition would have begun to be improving in the second semester of the year, hoping that the economic growth target set at 6.3 - 6.5 percent this year would be achieved. "We lay our hope on the second semester. We hope that there would be improvement in the global economy," he said. Bank Indonesia has predicted that Indonesia`s economic growth in 2013 at a range of 6.2 - 6.6 percent, lower than the previous estimate at 6.3 - 6.8 percent.