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March 20, 2008

Fuel price to be revised in 2008 budget

The fuel subsidy bill having been forecast to hit 106.2 trillion rupiah ($11.53 billion) this year, Indonesia is expected to revise the oil price in its 2008 budget to between $90-$95 per barrel, reported Reuters.

The subsidy will be more than twice the original budget forecast of 45.8 trillion rupiah.

"The government and parliament's energy commission have agreed an oil price of $90-$95 per barrel for the 2008 budget. But a decision will be made by parliament's budget committee," the news agency quoted Luluk Sumiarso, director general of oil and gas at the ministry, as saying Wednesday.

According to the agreement, the budget will be set aside to subsidise the sales of 37 million kiloliters (kl) of fuel this year.

The subsidised fuel products include 7.56 million kl of kerosene, 18.48 million kl of gasoline and 11 million kl of diesel fuel, according to a government report.

According to the presidential regulation signed in 2005, gasoline sells at 4,500 rupiah (48 US cents) per liter under the state subsidy, kerosene at 2,000 rupiah (21 cents) and diesel fuelat 4,300 rupiah (46 cents).

Previously, the government and parliament's budget committee  had agreed a crude price assumption of $85 a barrel for this year. The global oil price is currently hovering around $109 a barrel.

Indonesian authorities have been watching the crude price carefully given the ballooning cost of paying for fuel subsidies in Southeast Asia's biggest economy and Asia Pacific's only member of OPEC.

Indonesia has turned a net importer of crude oil in recent years after production has slumped as the country failed to tap new fields fast enough to offset its ageing reservoirs.

The country has been offering new exploration rights and financial incentives for oil fields in a bid to stem a steady decline in production.

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