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May 24, 2008

Govt finally raises fuel prices

Indonesian energy minister Purnomo Yusgiantoro: The government has no choice but to slash subsidies.

Amidst protests across the country, Indonesian government went ahead and increased fuel prices as it had promised since early this month.

"Considering the rising global fuel price and the heavy burden of subsidies on the budget, we have decided to raise the fuel price. It is effective at 00:00 May 24," said Energy and Mineral Resources Minister Purnomo Yusgiantoro.

The price of premium gasoline went up from 4,500 rupiah to 6,000 rupiah per liter, diesel oil from 4,300 rupiah to 5,500 rupiah and kerosene from 2,000 rupiah to 2,500 rupiah.

To soften the blow for the millions of Indonesians living on less than two dollars a day, Jakarta has outlined plans for direct cash transfers to the poor amounting to 14.1 trillion rupiah ($1.5 billion).

Following the House leaders` opposition to the plan last week, House Speaker Agung Laksono said the Legislative Assembly planned to invite the president for a clarification of the government`s plan to increase fuel oil prices and actually the head of state was ready to meet the request.

The government`s decision on the fuel oil price hike was an attempt to reduce the state budget deficit caused by the soaring world crude oil prices.

The price hike sparked protests across the sprawling archipelago of 234 million people when it was flagged earlier this month by President Susilo Bambang Yudhoyono.

The ex-general had promised not to raise fuel costs until after elections next year, but with oil prices smashing records above US$130 a barrel this week the government felt it had no choice but slash subsidies.

Indonesian motorists are now paying 33.33 percent more to fill their tanks with premium gasoline at 6,000 rupiah (65 cents) a litre, while diesel fuel for transportation has leapt 27.9 percent to 5,500 rupiah.

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