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Indonesia may ban use of subsidised fuel after Eid el-Fitr

world Updated: Jul 14, 2011 08:45 IST

Indonesia may ban private vehicles from using subsidised fuel after the Islamic festive season of Eid al-Fitr, which falls in end-August, a director at the energy ministry said on Thursday.

But the government has yet to discuss the issue with the House of Representatives, which will have a final say, said Evita Legowo, director general for oil and gas at the energy ministry.

"At the moment, our colleagues at the House's budgeting committee prefer that private vehicles not use subsidised fuels anymore," Legowo told reporters, adding that the government wanted to impose the measure after the festive season.

Jakarta has said it may limit consumption of subsidised fuels this year, after earlier delaying a plan to wean private cars off cheap gasoline, as it aims to keep a budget deficit at no more than 2.1% of GDP.

Indonesia's parliament in March agreed the delay to the government's previous plan to limit subsidies, as rising oil prices pushed up inflation, though finance minister Agus Martowardojo warned at the time that if the plan was delayed to next year it would add up to 6 trillion rupiah ($703 million) to the state budget.

The country's June annual inflation eased to a one-year low and the central bank said this week it is likely to stay under control, keeping its benchmark policy rate at 6.75% for a fifth-straight month, with room to hold rates. But some analysts see rising inflationary pressures because of the festive season and the possibility that the government could curb fuel subsidies.

Indonesia is the world's most populous Muslim nation. The Ed al-Fitr festivity marks the end of the Ramadan fasting month.