November Fuel Price Hike Increasingly Certain

Kompas.com Reports Premium Fuel Prices to Increase 46% on November 1, 2104
Kompas.com reports that it is now confirmed that the newly installed Indonesia President and Vice-President, Joko Widodo and Jusuf Kalla, will dramatically increase the cost of gasoline effective November 1, 2014. Kompas quotes sources close to the new President that the cost of subsidized gasoline will increase Rp. 3,000 per liter.

The unnamed source said: “This is in accordance with the original plan to increase (the price) by Rp. 3,000 per liter.” This means that subsidized premium gasoline will increase 46.1% from Rp. 6,500 per liter (US$0.54) to Rp. 9,500 (US$0.79) per liter.The reduction in the amount of subsidy for gasoline will represent a savings of Rp. 20 trillion (US$1.66 billion) to the state budget.

In order to offset the inflationary hardship the sudden increase in the cost of gasoline will cause to poor, the government is putting place short-term programs to assist the estimated 20 million poor families projected to be most burdened by the reduction in fuel subsidies. While the Joko Widodo and Jusuf Kalla have expressed a desire to provide more generous compensation to Indonesia’s poor, efforts to do so may be obstructed by the “Red and White Coalition” headed by the disgruntled loser in the presidential election – Prabowo Subianto.

The coalition controls 63% of the seats in the National House of Representatives (DPR-RI). Whether or not prices will increase on November 1, 2014 as reported by Kompas.com remains to be seen. That there will be such a hike in the very near future to reduce the unsupportable burden placed on the State budget by fuel subsidies is now very much a forgone conclusion and a difficult job left to Joko Widodo’s by his irresolute predecessor.

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