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JAKARTA - Indonesians will enjoy lower fuel, cooking gas and cement prices next week, yet prices of other goods and services may not immediately follow suit as business struggle with a weakening currency and high distribution costs.
The price of widely used low-octane gasoline, sold by state energy company Pertamina as Premium, will drop by 13 percent by midnight Sunday to Rp 6,600 a liter, President Joko Widodo announced at the State Palace on Friday. Diesel fuel is reduced to 6,400 rupiah, down from 7,250 rupiah.
This marks the second price drop this year, following the Joko administration’s surprise announcement on Jan. 1 to scrap the subsidy for Premium entirely — effectively lowering retail prices nationwide by bringing them in line with record-lows on the global market.
The decision to scrap the subsidy for Premium followed a decision in November to increase the then-subsidized prices by 33 percent. Global oil prices have fallen 60 percent in the last six months, due to the glut of US shale oil and weak global demand.
In addition, Pertamina will sell liquefied petroleum gas (LPG) at Rp 129,000 per 12-kilogram canister, a cut of 4.2 percent. The president announced he would seek to reduce cement prices by Rp 3,000 per 50-kilogram sack. Retailers in Jakarta sell cement at around Rp 50,000 a sack.
Still, economists say the price cuts’ impact will not be felt by consumers for at least three months. Lana Soelistianingsih, a University of Indonesia economist, said the weakening rupiah would deter manufacturers who rely on imports from cutting their prices.
The rupiah has fallen 1.3 percent so far this year to trade at 12,593 against the US dollar, extending its 2 percent loss from last year, data from Bank Indonesia, the country’s central bank, showed.
Logistics and distribution costs may also remain at current levels, as transportation companies seek to cover rising costs in spare parts, most of which are imported. “Public transportation fares remain the same. Lower fuel prices may not cause a drop in fares during this period,” Lana said.
Inflation accelerated 8.4 percent in December 2014 from the same month in 2013. Food prices rose 11 percent last month compared to December 2013, Central Statistics Agency (BPS) data show. Public transport companies also increased their fares by an average of 25 percent following the fuel hike.
David Santoso, the chief financial officer of taxi operator Express Transido Utama, said his company had no plans to lower fares yet, and would wait for official news from the Land-Based Transportation Organization (Organda) industry group. “We need time to assess this news and do some recalculations,” David said.
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