JAKARTA: Indonesians are preparing for the prospect of sharply higher fuel bills after the government said it would increase subsidized fuel prices by 28.7 percent to rein in the budget deficit.

The government has set the figure on the upper limit of expectations despite widespread protests against the move ahead of elections next year.

The hike is designed to limit the impact of record world oil prices, which are blowing out the government's multi-billion-dollar fuel subsidy scheme and
sucking state money out of social programmes.

Referring to the average price rise across the different types of fuel, Finance Minister Sri Mulyani, said the figure is relatively final and “will be 28.7 percent”.

It’s the first time a senior minister has put a precise figure on the price hikes, which have sparked almost daily protests since the government announced its intention to slash fuel subsidies earlier this month.

The price hike would see the cost of premium gasoline in Southeast Asia's biggest economy climb to 5,790 rupiah a litre from the current price 4,500 rupiah.

Even though they will still enjoy some of the cheapest fuel in the world after the price hike, many ordinary Indonesians say higher fuel prices combined with the soaring cost of food will put a strain on family budgets.

Officials haven’t confirmed when the new fuel price regime will be implemented, only that it will not be introduced until the government finalizes a package of measures designed to offset the impact on the poor.

The administration has outlined plans for direct cash transfers amounting to 14.1 trillion rupiah - that’s less than half of the 34.5 trillion rupiah the government expects to save from subsidy spending as a result of the price hike.

Officials said that by raising fuel prices, the government could limit subsidy spending to between 126 trillion rupiah and 135 trillion rupiah.

Without the increase, fuel subsidies could swell to over 190 trillion rupiah -more than four times the original budget forecast for 2008.

President Susilo Bambang Yudhoyono is reportedly going to announce the timing of the move on May 23.

-AFP/cl