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The government plans to scrap import duties and taxes on oil
and gas drilling equipment to help boost spending on exploration.
The finance minister will abolish 27.5 percent of taxes ``soon,''
Anggito Abimanyu, head of fiscal policy at the ministry, said in
Jakarta Tuesday after meeting Indonesian Vice President Jusuf Kalla and
Energy and Mineral Resources Minister Purnomo.
``There's not much change to the state's budget from the new policy.
The change is in the cash flow of oil and gas producing companies," he
was quoted as saying by Bloomberg.
Indonesia is trying to reverse a decade-long slide in oil production
prompted by maturing fields and a lack of exploration.
Meanwhile, Purnomo said earlier in the day that the government would
announce whether it would press ahead with its plan to restrict the
sale of subsidized fuels to public transportation vehicles and
motorcycles or drop the proposal altogether in early January, a senior
official says.
The minister said Tuesday that his ministry and other relevant
ministries were still studying the proposal, and expected to make a
decision in early January.
"We are doing this because the decision will not only have an effect on
the economy, but also major social and political consequences," he said.
"We are also monitoring the movement of global oil prices as the plan
was proposed because of fears that the continued surge in oil prices to
around US$100 a barrel next year would have a serious impact on the
budget," he added.
When asked whether the proposal would be dropped now that oil prices
were currently hovering at around $90 per barrel, the minister refused
to say, insisting that the decision would be made based on the outcome
of the interdepartmental meetings.
The proposal was first made public by Director General of Oil and Gas
Luluk Sumiarso, who said that the government was considering
restricting the sale of subsidized 88-octane Premium gasoline to public
transportation vehicles and motorcycles,
with private motorists being required to purchase the new, more
expensive 90-octane gasoline.
He said that the proposal would likely be put into effect in the first
quarter of 2008 in order to prevent the 2008 budget deficit spiraling
out of control, given that oil prices are expected to continue to rise
next year.
However, the proposal has drawn protests from members of the public and
some economists, who say it will not only lead to high inflation but
also social chaos.
Amid the growing opposition, the government appeared to back away from
the proposal, saying it would need more time to discuss it and see
whether there were any better options available.
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