Producers and Traders Trying to Cope with Fuel Price Increase

KOMPAS/RADITYA HELABUMI

Shinta W Kamdani, the vice chairwoman of the Indonesian Chamber of Commerce and Industry.

JAKARTA, KOMPAS — In line with the increase in the prices of subsidized fuel, producers and traders have also begun to increase the prices of their goods and services. As a result, business growth will be hampered due to a decline in consumer buying power. The vice chairwoman Shinta W. Kamdani of the Indonesian Chamber of Commerce and Industry (Kadin) said on Sunday (4/9/2022) that almost all producers and traders would be affected by the decline in consumer buying power.

The subsidized fuel hike, which was immediately followed by the increase in the prices of food and other basic needs, would slow public consumption, which would ultimately suppress demand and supply. “Although the government has tried to reduce the [fuel hike’s] negative impacts with various kinds of subsidies to the community," she added.

The government also raised the price of Pertamax from Rp 12,500 per liter to Rp 14,500 per liter.

The government finally announced the price hike for subsidized fuels on Saturday (3/9) after the planned hike drew pros and cons from the public in the last few weeks. The price of Pertalite gasoline was raised from Rp 7,650 per liter to Rp 10,000 (70 US cents) per liter, and the price of Solar diesel was raised from Rp 5,150 per liter to Rp 6,800 per liter. The government also raised the price of Pertamax from Rp 12,500 per liter to Rp 14,500 per liter.

KOMPAS/RADITYA HELABUMI

Motorcycle riders refuel at one of Pertamina's gas stations in West Jakarta, on Friday (11/2/2022).

Secretary-general Edy Misero of the Indonesian Micro, Small and Medium Enterprise (MSME) Association (Akumindo) said an increase in the retail prices of goods and services was unavoidable because producers needed to cope with increased production costs caused by the subsidized fuel hike.

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MSMEs, which mostly use subsidized fuels, are among the most affected by the price hike.

Producers and traders have to cope with the impact of the subsidized fuel hike. The increase in their operating or production costs will result in an increase in the prices of their goods and services. The price adjustment will depend on the fuel consumption figure in their production and operational costs.

Producers should, therefore, be prepared to reduce their profit margins.

However, Edy called on producers not to excessively increase the prices of goods and services to exceed the ability of the people to purchase them, because this could harm their businesses in turn. Producers should, therefore, be prepared to reduce their profit margins.

Starting to increase

The prices of various basic commodities in a number of areas have begun to rise, following the increase in the subsidized fuel prices. As seen on the East Java administration’s website, siskaperbapo.jatimprov.go.id, the price of IR64 rice was increased to Rp 9,500 per kilogram in early September from Rp 9,300 per kilogram previously.

NINA SUSILO

East Java Governor Khofifah Indar Parawansa

East Java Governor Khofifah Indar Parawansa said the provincial administration was considering using the province’s standby funds (BTT) to control the local inflation rate. "The BTT funds can be used to

subsidize, for example, logistics transportation, to prevent an increase in the inflation rate," said Khofifah.

On Wetar Island in Southwest Maluku Regency, Maluku, the price of fuel has exceeded three times the official price.

Transportation fares in Kendari, Southeast Sulawesi, have also immediately jumped. Drivers of public transportation modes such as mini buses and ojek (motorcycle taxi) have increased their fares by an average 20 percent.

In Sorong, West Papua, as many 100 public transport drivers staged a demonstration, demanding that transportation fares be increased from Rp 4,000 to Rp 8,000 per passenger. (AGE/BKY/NIK/NIT/ETA/BRO/FRN/FLO/AIN/JAL/OKA)

This article was translated by Hendarsyah Tarmizi.