Governments cut subsidies as prices rise

The reductions in subsidies are causing protests across the region as the pain of high prices starts to be felt more widely. India had moved to increase its petrol and diesel prices by about 10%; Sri Lanka, which has no indigenous hydrocarbon production, has also upped prices. The Malaysian government has meantime taken the bold step of restructuring fuel subsidies as it was facing a bill of more than 28 billion ringgit (US$8.56 billion). By raising pump prices and adjusting electricity tariffs, Malaysian Prime Minister Abdullah Badawi believes the country can save 13.7 billion ringgit (US$4.19 billion). “With oil prices breaching levels of US$130 per barrel, governments the world over are staring into a financial abyss as fuel subsidies threaten to run amok,” Badawi said in his keynote address at the Asia Oil & Gas Conference. Indonesian President Susilo Bambang Yudhoyono had reneged on earlier pledges and slashed fuel subsidies, leading to an almost 30% increase in the price of liquid fuels, including kerosene, which many rely on for cooking and lighting. The trend of reducing subsidies was bucked by South Korea, which relies heavily on imports of liquefied natural gas to meet its energy demand. South Korea announced US$10.2 billion worth of tax rebates and subsidies to help consumers and businesses cope with soaring energy costs. (June 9/12/13, 2008)