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Indonesia plans subsidy to offset fuel-price increase

Indonesia will pay a subsidy of 100,000 rupiah (US$9.94) to millions of poor households to help compensate them for a fuel price increase, ministers confirmed yesterday.

Information Minister Sofyan Djalil said the scheme was aimed at cushioning the impact of an impending fuel-price increase on 60 million Indonesians living in 15.5 million households considered as poor.

Djalil said payment was expected to be made starting this month, for an initial three-month period, but the government had not set a date for a fuel-price increase.

"Before oil prices are raised, we want to make sure the most vulnerable groups in society will be protected," Djalil said.

He said the money will be channeled to those eligible through state postal company Pos Indonesia and state-owned Bank Rakyat Indonesia.

The direct cash scheme will be reviewed after three months and could be the forerunner for a social security system in Indonesia, he said.

"We can't expect all those 15.5 million households to receive the money on the same day," he noted.

"The first payment will likely go to cities, towns on Java and Sumatra islands. Big cities are easier because the postal and banking systems are better. If this can be achieved before the end of this month that will be great," he said.

Sri Mulyani, who heads the National Development Planning Agency, said the payments would not meet all the poor's needs but would help offset the higher cost of fuel, which they mainly use in the form of kerosene for cooking.

Faced with a slumping currency because of soaring world oil prices, Indonesia decided last month to raise the prices of the heavily-subsidized kerosene and automotive fuels.

A global rise in oil prices has prompted the government to snap up dollars to pay for oil imports and so put pressure on the budget due to the expensive fuel subsidies.
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