Govt to Raise Fuel Prices by 28.7%

SEMINYAK/JAKARTA ~ The central government said this week that fuel prices would be hiked by an average 28.7 percent, as record international oil prices threaten to blow out the budget deficit.

“The figure is relatively final, it will be 28.7 percent,” Finance Minister Sri Mulyani was quoted as saying on the state-run Antara news agency late on Wednesday.

It is the first time a senior minister has put a figure on the price hikes, which have sparked almost daily protests since the government announced its intention to slash its multibillion-dollar subsidy scheme earlier this month.

She did not say when the new price regime would be implemented, only that it would not be introduced until the government had finalized a package of measures designed to offset the impact on the poor.

A 28.7-percent rise would see the cost of premium gasoline climb to Rp5,790 (63 US cents) a liter from the current price Rp4,500.

President Susilo Bambang Yudhoyono says the move is essential to rein in the budget deficit and free up funds for spending on social programs and the country’s crumbling infrastructure.

But the government is facing mounting opposition from the street as well as parliament, where most parties have turned against the plan in a bid to win favor with voters ahead of elections next year.

The government last raised its fuel price in 2005, by 126 percent, sparking widespread protests.

The government chose to announce the latest average price rise on the 10th anniversary of the fall of former president Suharto, who resigned under the weight of a mass protest movement sparked by a fuel price rise.

Thousands of demonstrators took to the streets around the country earlier on Wednesday to condemn the government’s plans and demand protection from surging commodity prices.

“The rise of fuel prices will strangle us. It’s hard for a housewife like me as the price of everything has risen even before the announcement” of the fuel price hike, said one protester outside the presidential palace.

Economy Minister Budiono warned, however, that any delay in raising fuel prices would only worsen Indonesia’s predicament.

“There are things that we should do if fuel prices aren’t raised, and after consideration it will be much heavier for us all to bear,” he said.

The government’s fuel subsidies are based on assumed oil prices of around $95 a barrel but the cost of crude surged past $130 a barrel for the first time on Wednesday.

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