Indonesia to consider raising price of subsidized fuel

The Indonesian government said it is considering raising subsidized fuel prices by as much as 44% this year so that funds can be used on infrastructure instead. Vice Energy Minister Widjajono Partowidagdo said that increasing fuel prices will need a change in the law and will require parliamentary and presidential approval. He said, however, that the idea is gaining support from the public. Lawmakers are wary of raising fuel prices because doing so could spur inflation and cause social unrest. In 1998, sudden increases in fuel prices contributed to the ouster of Suharto. At 4,500 rupiah (US$0.50) a liter, Indonesia’s subsidized gasoline is the cheapest in Asia and is just half the current market rate. Although cheap fuel supports economic growth, last year it cost the government US$18 billion in subsidies and economists say the money could instead be used to develop the country’s infrastructure. (January 31, 2012)