After weeks of preparation to limit private cars' use of subsidized fuel, President Susilo Bambang Yudhoyono backtracked on Monday.

The President harbored doubts of the policy'€™s capacity to contain subsidy costs.

Presidential spokesman Julian Aldrin Pasha said the President was studying alternatives to providing subsidized fuel for only public transportation and motorcycles.

'€œThere'€™s a positive and negative side to all the options,'€ said Julian after a limited Cabinet meeting on the policy.

'€œThe President wants a one-price policy for all motor vehicles,'€ he said, adding that the President was still working on a fair distribution scheme for subsidized fuel to the poor.

Government officials had been optimistically vocal over the dual-price policy with public transportation and motorcycles still enjoying the current subsidized price of Rp 4,500 (46 US cents) per liter and private cars required to pay Rp 6,500.

State-owned energy company PT Pertamina had prepared more than 5,000 gas stations across the country to accommodate the strategy and had printed banners to raise public awareness.

Energy and Mineral Resources Minister Jero Wacik said the government had decided to make some changes to the plans after substantial opposition and doubts over the adequacy of the scheme.

'€œThere is confusion over the policy. To make it more comprehensible, the government may decide to raise the fuel price all together. My guess is that the price will not exceed Rp 6,500,'€ said Jero.

He also acknowledged that the dual-price policy would result in fraud and leakage as motorcycle and public transportations drivers could easily resell fuel to private car owners at a cheaper price.

Both Jero and Julian said the President was still undecided over the timing of the increase.

A rise in the fuel price is always politically sensitive, often with the consequence of mass rallies that end in violence.

The government had been pressured to cut fuel subsidies and raise the price of fuel at the pumps following estimates that the tumefying subsidy could stretch the state coffers to such an extent that it may stop government spending on infrastructure, education and health.

A rise in price would also help reduce imports in anticipation of weaker demand from motorists. This would help the close the widening trade deficit, mostly attributable to fuel imports.

Any easing in the trade deficit would strengthen the rupiah, which now hovers just above Rp 9,700 on concern that dollar outflow has outpaced dollar inflow.

A change in policy is also necessary because around 77 percent of the fuel subsidies '€” earmarked in the 2013 state budget at Rp 194 trillion ($20 billion) '€” are enjoyed by the upper middle class.

Finance Minister'€™s fiscal agency chief Bambang Brodjonegoro believes the government could save more than Rp 30 trillion with a one-price policy, more than the Rp 21 trillion expected from the dual-price option.

However, as with most substantial adjustments to economic policy, timing will play a vital role.

'€œThe longer the implementation takes, the higher the volume of subsidized fuel will get. For every million kiloliters in excess of the fuel allocation, we will have to spend between Rp 4.5 trillion and Rp 5 trillion.'€

Bambang is also concerned about the impact the increase will have on inflation, and of the difficulty in calculating that impact.

Jero has highlighted the government'€™s worries over inflation and the knock-on effect it might have on the poor.

'€œWe'€™re still working on the inflation risk and the compensation that will be needed for the poor, in the form of the free rice program, education or family welfare aid,'€ he said.

Chairman of the Chamber of Commerce and Industry (Kadin) Suryo Bambang Sulisto has urged the government to decide immediately on the policy and create an ambience of certainty for business.

'€œBusiness players will need three to six months to adjust to the new policy. There should be a clear signal now, so that businesses can immediately begin to estimate the effects,'€ he said.

Kadin will fully support the policy and is in favor of the complete eradication of fuel subsidies, citing potential fraud and smuggling due to price differences.

Amahl S. Azwar contributed to this story

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