Government Asks Industry to Keep Prices From Rising

Jumat, 21 Juni 2013 | 11:32

The Ministry of Industry asked the industry, both large and Small and Medium Industries (SMI), to not raise their products’ price despite the subsidized fuel price hike.

Industry Minister Mohamad Suleman Hidayat said the cost of production is going to increase by about 1.2%. However, the increase would be temporary and would return to normal in time. "There will be an increase by about 1.2%, but after two or three weeks it will decline again," said Hidayat in Jakarta, Wednesday (6/19).

Director General of IKM for the Ministry of Industry Euis Saedah asked the industry, IKM in particular, not to raise prices due to subsidized fuel price hike. According to her, the industry only needs to adjust within around three or four months to get back to normal.

Saedah said the rise in selling price of products is not the solution. She admitted that the subsidized fuel price hike would make quite an impact on IKM. However, she is sure the IKM could flexible to adjust itself so that the higher selling price could be avoided.

"We hope the entire party including the IKM understands this condition. Probably with the fuel price hike, profits is reduced a little, but not until posting loss. Let’s bear this hard time together by not raising prices," she said.

In the meantime, IKM business players would deal with increasing production costs through efficiency in several sectors such as raw materials, labor, and distribution costs.

Cianjur District Chamber of Commerce and Industry Vice Chairman Irianto said the raw materials efficiency would indeed impact the IKM production volume. However, it must be done to maintain the business sustainability.

Moreover, the labor efficiency could be done by utilizing more machines in the production and the distribution could be done along with other IKM with similar business.

Irianto said that the food industry would by significantly impacted by fuel price hike. "The IKM is the most pliable and flexible business sectors against changes in economic conditions since the efficiency can be done easily. We projected that fuel price hike will only impact 5% at maximum to the cost of production,” he said.

Based on Directorate General of SMEs Ministry Industry, impact of fuel price hike by 44% and diesel 22% will only affect production cost by 1.2%-5%. As for the effect will be felt by SMEs a maximum 4 months.

Chairman of Commission VI Airlangga Hartarto asked the government to fix infrastructure developments plan related to subsidized fuel price hike, considering the high cost of goods and services distribution.

He said although subsidized fuel price rising give more negative impact, distribution cost composition is too high. The condition will disserve businessmen because it will decrease competitiveness.  “To reduce negative effects of fuel price hike is the infrastructure improvement. Currently, distribution cost has reached double-digit,” he said.

He also sees that more significant effect related to fuel price rising to SMEs is the interest rate. He said the interest rate is too high compared to fuel price hike. Logistic businessmen estimated that logistic cost will increase IDR12 trillion if the government raise subsidized fuel price this year.

Logistic Cost

On the other side, Chairman of the Indonesian Logistics Association Zaldy Ilham Mashita explained fuel price hike will increase logistic cost by 5%-7%.

Zaldy said the plan of diesel price hike to IDR5,500 per liter from IDR4,500 will automatically give effect to logistic cost as the transportation cost components contribute 60% of total logistic cost.

Based on calculation, some 80% of logistic transportation cost hike derive from land transportation and if diesel sold at IDR5,500 per liter, it will make land transportation cost increase 10% because fuel components reach 35%-40% of land transportation cost.

Meanwhile, Jakarta Provincial Government has given green light to The Organization of Land Transportation Owners if they want to raise public transportation fares in the city.

Jakarta Deputy Governor Basuki ‘Ahok’ Tjahaja Purnama hopes if public transportation fares are increased, the bus quality should be improved. He asked the Kopaja and metromini owners to replace their vehicles into more proper so can be integrated with Trans Jakarta.

Separately contacted, Chairman of Organda DKI Jakarta Soedirman said public transportation fares hike is estimated to reach 30% by considering spare parts price rising, maintenance, driver wages and other equipments. (aph)

by Riendy Astria, Aprianto Cahyo Nugroho, Elok Ani Rian