Govt to lower fuel subsidy to Rp 68.5 trillion in 2006

The government will lower the fuel subsidy by about Rp 32.97 trillion to Rp 68.5 trillion in the 2006 state budget from about Rp 101.47 trillion estimated for this year.

Speaking in his speech on the country's 2006 state budget draft, President Bambang Susilo Yudhoyono said in Jakarta on Wednesday that the government did not have choices but to raise fuel prices at home in line with rising international oil prices in order to be able to cut the fuel subsidy.

"Raising the fuel prices is not a wise decision but we have to do it," the President said in his speech. The amount of the fuel subsidy in the proposed 2006 state budget is based on the oil price reference of US$40 per barrel.

The government initially fixed the subsidy at Rp 76.5 trillion in the 2005 state budget. However, the sharp increase in the price of the crude oil prices in the international market has forced the government to revise the allocation for the fuel subsidy spending to Rp 101.47 trillion, or an increase of Rp 24.9 trillion. (dino)