Indonesia's new govt rethinks fuel price hike after oil drop

[JAKARTA] Indonesia's new government is rethinking the timing and size of a rise in subsidized fuel prices following a sharp drop in global oil prices, the vice president's office said on Thursday.

President Joko Widodo was poised this month to raise prices by as much as 3,000 rupiah (US$0.25) per litre, but a 7 per cent decline in US crude prices since his Oct 20 inauguration has eased the pressure to act quickly.

Mr Joko, who took office on Oct 20, has promised to confront a ballooning US$23 billion fuel subsidy bill, the main factor behind the budget and current account deficits. "How much the hike will be is the crucial part, especially since there has been a decrease in the global oil price. That is why the price is still being discussed," said Husain Abdullah, spokesman for Vice President Jusuf Kalla.

Indonesia's subsidized fuel prices are among the cheapest in the world with gasoline costing 6,500 rupiah a litre and diesel 5,500 rupiah.

Mr Joko's government has been considering a fuel price hike of between 2,000-3,000 rupiah. "If we follow the trend, it should be this month. But we don't know for sure, there are other considerations to decide on a precise date," Abdullah said.

Mr Joko is expected to discuss the fuel subsidy issue with Kalla and his cabinet after he returns next week from attending the G20 summit in Australia.

Raising fuel prices is a sensitive issue that typically sparks protests and contributed to the downfall of long-serving autocrat and then president Suharto in 1998.

Protests, which remain largely peaceful, have been staged on a regular basis in Jakarta and other major cities ahead of the expected announcement.

REUTERS