increasing price of fuels..

Indonesia to raise fuel prices by 28.7%: finance minister


The Indonesian government is set to increase fuel prices by an average
28.7% before finalizing a package for the poor that would soften the blow of
the price hike, Finance Minister Sri Mulyani said late-Wednesday.
A 28.7% rise would mean the pump price for premium RON 88 gasoline would
rise to Rupiah 5,790/liter (65 cents/liter) from the current Rupiah
4,500/liter. The fuel price hike is expected end-May.
The National Development Planning Minister Pazkah Suzetta had earlier
said fuel prices, which are heavily subsidized in the country, would be
increased by up to 30% in a bid to save the government Rupiah 35 trillion
($3.8 billion). "We are in dilemma, but around 70% of fuel subsidies are
enjoyed by 40% of Indonesia's higher income group," Sri Mulyani said, adding
that inflation is expected at 11.2% this year once fuel prices go up.
She added the government expects Indonesia's fuel consumption to fall
after the price rise.
Indonesia will introduce smart cards to limit the sale of subsidized fuel
to motorist by September this year. The fuel consumption forecast for 2008 at
35.8 million kiloliters already looks set to be exceeded by 15%, with Q1 usage
filling 27% of the year's quota. Meanwhile, fuel consumption over the past two
weeks increased 15%.
In 2007 the state budget groaned under the weight of fuel subsidies that
ballooned 62% beyond initial estimates to Rupiah 90 trillion ($9.8 billion).
This year's projected allocation was Rupiah 45.8 trillion, but it is likely to
go up to Rupiah 126.8 trillion with crude touching unprecedented highs in the
last few months.
A fuel price hike is a sensitive issue in Indonesia. The last fuel price
hike of 126% in October 2005 sparked street protests. The government is facing
mounting opposition from the people and in parliament with most political
parties against the price hike.