Government to Propose Oil Fuel Price Hike

Government to Propose Oil Fuel Price Hike

Government had prepare a scenario to raise subsidized oil fuel price with average 28,7% start from June 1, 2008, this plan come after world oil price that keep shaking.

The fiscal policy proposal prepared by United Indonesia Cabinet economic team had aim to save 2008 revise state budget that bloat cause of oil fuel subsidy, sources that close to the team said.

In the proposal, its include kerosene price for household, rise 25% to IDR 2.500 per litre, premium gasoline rise 33,33% to IDR 6.000 per litre and diesel fuel rise 27,91% to IDR 5.500 per litre.

According to the plan, the proposal will bring to President and if approve, then the plan will be discuss in the parliament (DPR).

The source said through this policy, state will save IDR 25.87 trillion. but government still need to pay IDR 3.87 trillion additional cost, so in total the amount that could be save about IDR  22 trillion.

The money that saved will be use to finance IDR 11.5 trillion Direct Cash Transfer Program (BLT) and IDR 3 trillion budget risk additional reserve, IDR 8.38 trillion deficit reduction (0,2% from PDB) and IDR 3 trillion additional fund for poor people.

On the contrary, if government not rise subsidized oil fuel price, budget burden will jump up IDR 31.5 trillion, then add with IDR 8.25 trillion oil fuel rise risk reserve. finally, 2008 revise state budget deficit could be 2,5% and poverty will rise to 19,5%.

When it confirm about the plan to Paskah Suzetta State Minister for National Development Planning/National Development Planning Board chairman. He said government had no resolve yet on raising subsidized oil fuel price on June 1, 2008.

Paskah futher said government still try other alternative to alleviate the state budget’s burden without raising oil fuel price.

Anggito Abimanyu Finance Ministry head of fiscal policy (BKF) said this month oil consumption and lifting will determine government policy.

In addition to subsidy control, price adjustment is one of the alternative option but the price rise option still open.

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