Yudhoyono sees no political blow in raising fuel prices

Desy Nurhayati ,  The Jakarta Post ,  Jakarta   |  Thu, 05/08/2008 1:06 AM  |  Headlines

President Susilo Bambang Yudhoyono said Wednesday he preferred to risk unpopularity by raising fuel prices than to leave the country's economy in jeopardy.

"I've received messages from the public demanding the government delay the increase until next year's presidential election, but I've responded that if that was my consideration then I would be wrong. I would be sinful," he said before the country's top banking leaders.

"My concern isn't about practical politics or individual interests, but more about how to bring this country to a better condition. The increased fuel prices will, of course, be cushioned with an aid scheme for protecting the poor," he said.

The government has disclosed plans to raise fuel prices in June to avoid a state budget blowout from fuel subsidies amid skyrocketing global oil prices.

A proposal circulating in several media outlets last week suggested an average 28.7 percent increase in prices, with premium gasoline going up to Rp 6,000 (65 U.S. cents) per liter from Rp 4,500.

Diesel would increase to Rp 5,500 per liter from Rp 4,300, and kerosene to Rp 2,500 from Rp 2,000.

The decision to cut subsidies that keep gasoline, diesel and kerosene below international prices, in a bid to make the fuels affordable to the country's millions of poor, may risk nationwide demonstrations and political opposition from parties vying for position ahead of next year's elections.

The government last raised fuel prices in 2005 to nationwide protests, but won praise from international donors and the business community.

In a bid to maintain the purchasing power of medium and low-income people, Finance Minister Sri Mulyani Indrawati said the government would provide Rp 2 trillion in direct-cash transfer for the underprivileged.

"If the fuel prices increase in June, we may need to spend some Rp 14 trillion to fund poor people until the end of this year," she said, adding the government was still preparing the new scheme for the cash aid.

The business community has also demanded the government raise the amount of the cash transfer in efforts to fuel business activities by maintaining the public's purchasing power.

Since the late 1997 Asian financial crisis, Southeast Asia's largest economy has seen some 70 percent of its economy fueled by public consumption amid weak export performance and dwindling growth of foreign direct investment.

The high level of consumption is also spurred primarily by low prices of energy, keeping production and logistics costs lower.

However, with global oil prices climbing above $120 a barrel, Sri Mulyani believed the government could not guarantee there would not be more fuel price increases in the future.

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