Govt to go ahead with fuel price hike next month

JAKARTA (JP): The government said on Thursday it would go ahead with a plan to raise fuel prices in October, but was still unsure of the exact date of the increase.

"It's unlikely that we can either cancel, alter or delay the fuel price increase," Cabinet Secretary Marsillam Simanjuntak said at the presidential office.

He said the decision to go ahead with the fuel price hike came following a Cabinet meeting led by Vice President Megawati Soekarnoputri.

However, Simanjuntak said the government had yet to decide on the exact date for the planned price increase.

"We'll look for the most appropriate time that will take into consideration economic aspects, and, foremost, the social, political and security aspects," he was quoted as saying by Antara news agency.

Coordinating Minister for the Economy Rizal Ramli said his economic team was only continuing the work of the previous team.

"What we are doing now is simply carrying out that plan, having decided to go ahead," Rizal said.

The government plans to raise fuel prices by an average of 12 percent to cut subsidy spending to about Rp 18 trillion (US$2.1 billion).

The price for premium gasoline will increase to Rp 1,150 per liter from Rp 1,000, automotive diesel fuel to Rp 600 per liter from Rp 550, kerosene to Rp 350 from Rp 280 and bunker fuel to Rp 400 per liter from Rp 350.

Rizal said the government might allocate the subsidy savings for infrastructure projects, as well as for the development of small and medium-size enterprises.

"This will help create more jobs," he added.

According to Rizal, reducing the fuel subsidy also would narrow the gap between local fuel prices and international prices.

Rizal said the existing price margin between local and international fuel prices had led to rampant fuel smuggling.

The government reported earlier it was loosing some Rp 1 trillion a year from the smuggling of fuel across sea routes alone.

In addition, safeguarding fuel from smugglers also will help secure the domestic fuel supply, Rizal said.

As part of an agreement with the International Monetary Fund, the government will reduce subsidy spending in this year's state budget.

Initially, the fuel price hike was scheduled for April, but massive demonstrations against the plan led President Abdurrahman Wahid to postpone it until October.

The government last raised fuel prices in 1998, which resulted in riots that contributed to the downfall of then president Soeharto in May of that year.

To help the poor cope with the rise in fuel prices, the government has said it will provide them with cash aid.

According to the National Development Planning Board, some 17.4 million poor families are eligible to receive the funds.

According to the plan, each poor family will receive an annual subsidy of Rp 50,000 to compensate for the increased fuel prices. (bkm)