Asian countries subsidising fuel hit hard by higher oil prices
KUALA LUMPUR, Sunday (AFP) Higher oil prices are creating major
problems for Asian countries which subsidize fuel costs, threatening
economic growth if the subsidies are kept in place and consumer outrage
if they are not.
Malaysia raised the price of fuel between seven percent and 23
percent last week in a bid to cut the soaring cost of government
subsidies, but analysts warned the country could face a "double whammy"
in the form of a slowdown in the growth rate and a hike in inflation.
Subsidies for petroleum cost the government 4.8 billion ringgit (1.2
billion dollars) last year and would reach 8.9 billion this year if
prices were not increased to help cope with rising international oil
costs, the government said.
A diesel shortage crippled Malaysia's transport industry last month
after the government introduced a quota system in an attempt to curb
smuggling of the heavily-subsidized fuel to neighbouring Thailand.
Thailand began subsidizing fuel in January 2004, but the scheme
quickly became a budget-buster as world oil prices kept rising.
Petrol subsidies were scrapped after nine months, and the government
in March reduced its diesel subsidy, sending prices at the pump jumping
by 20 percent.
Thailand has spent 84.7 billion baht (2.1 billion dollars) on both
petrol and deisel subsidies.
In India, the government has been trying to keep a cap on inflation
in the face of rising global oil prices.
Fuel cost rises can be political dynamite in a country where around
one quarter of the population of more than one billion live on less than
a dollar a day, but oil subsidies weigh heavily on the Indian budget and
attempts to contain a soaring budget deficit. The government resorts to
"off-budget" subsidies for specific products like diesel, kerosene and
liquefied petroleum gas (LPG).
It subsidizes the cost of LPG and kerosene, used largely by India's
rural poor, by charging more for gasoline used by more affluent car and
vehicle owners. But that hasn't managed to cover costs as demand for the
cheaper fuel grows as companies and consumers mix it with gasoline.
The government estimated the cost of the subsidy at three billion
dollars in the fiscal year ended March 31.
In Indonesia, despite strong opposition from the public and in
parliament, the government increased fuel prices by between 22 and 47
percent to help cut costly subsidies as of March 1.
The price of kerosene, mainly used by low-income families for cooking
and so a very sensitive commodity, was not raised.
Top economy minister Abu Rizal Bakrie said after the announcement
that the cash-strapped government was forced to act after having to
spend some 61 trillion rupiah (6.4 billion dollars) on subsidies in
2004.
The 2005 target for the subsidies was set at 39 trillion rupiah (4.2
billion dollars). Last year's fuel subsidy spending exceeded the initial
budget amount by more than four times because of higher than expected
world oil prices.The subsidies had also led to rampant smuggling to
Singapore and to East Timor, officials and police have said. |