Bus Fares to Stand Pat Amid Decline in Fuel Prices, Heeding Off Earlier Call for Higher Tariff

BY :ARIENTHA PRIMANITA & TABITA NUGROHO

JANUARY 02, 2015

Jakarta. Bus fares are likely to remain the same amid declines in fuel prices, heeding off an earlier call by a group representing public transportation business owners for a higher tariff to cope with rising costs for spare parts.

The government announced on Wednesday that the decline in the global oil price would allow it to scrap the subsidy for gasoline and reduce the subsidy for diesel starting on Jan. 1. That has resulted in the cheapest gasoline, known as Premium, being sold at Rp 7,600 a liter from Rp 8,500 previously. At the same time diesel is being sold at Rp 7,250 a liter, a slight decrease from Rp 7,500.

Coordinating minister for the economy Sofyan Djalil said the government will make the adjustment to fuel prices every month.

Still, Sudirman, the head of Jakarta Organization of Land Transport Operators (Organda), said the organization rejects that transportation fares be decreased in line with the drop in fuel and oil prices.

“Even before the previous announcement when the government raised the fuel price, the prices for spare parts had already increased. So it is impossible for the fares to be decreased after only by a mere hundreds of rupiah decrease in the fuel price,” he told the Jakarta Globe on Thursday.

Sudirman said that Organda had called for a 30 percent fare increase in November when the government raised the subsidized fuel price by an average 33 percent. But the government capped the fare increase to only 20 percent.

“If the government asks for another fare decrease it is just like killing our business. Can they lower the price of oil, tires and spare parts?” Sudirman said.

The fares staying at the same price may give no incentives for motorists, who are concerned more about quality than price, to change their modes of transportation — that they will continue to drive their own vehicles.

Some motorists are indifferent of the government’s move in lowering the fuel price, noting that the price difference of Premium with its higher octane alternatives such as Pertamax is too narrow for them to risk the loss in performance of their vehicles.

“Of course I choose Shell [over Pertamina’s Premium] because the fuel’s better for the machine and my motorcycle also performs better. My motorcycle runs faster and is fuel efficient,” said Dero, who drove a Supra X 125 scooter on Thursday.

Eka Puspita, who operates a diesel-powered Jeep, also agreed.

“If I drive a gasoline-fueled car I’d choose Pertamax because the [price] difference is only Rp 1,000,” she said. “It’s more efficient and better for the machine. At least, choosing Pertamax will cut my car’s budget on trips to workshops for check-ups.”

Energy and Mineral Resources Minister Sudirman Said said the new retail price was based on categories of fuel. In the new scheme, kerosene and diesel are included in the subsidized fuel category. Meanwhile, while RON 88 fuel, known as Premium, is included in the special set of fuels priced at Rp 7,600, but only in areas outside Java, Madura and Bali — which can change following regional administrations’ regulations like motor vehicle taxes.

The third category is the non-subsidized gasoline that follows market rates. The retail price at Rp 7,600 is based on the assumption that the global crude price will be at $60 dollar a barrel and the rupiah trades at 12,380 to the dollar. Brent is trading at around $57 a barrel, while the rupiah fetches around 12,500 per dollar.

Pertamina can take as much as a 5 percent margin from the basic price, while the provincial administration can take a maximum 10 percent.

“It does not mean that the government is hands off [in setting the price]. Based on the Constitutional Court verdict, fuel and gas prices are set by the government. We don’t have any intention to leave it to the market, but we take our role to set the price,” Sudirman said.

He added that the falling oil price puts the government in the right momentum to eliminate the subsidy. He said that even though the government could take advantage of that by selling gasoline at its economical price, the government still needs to pay for the fuel subsidy.

Additional reporting by Lona Olavia

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