Simon Montlake, Jakarta – Indonesia must tread cautiously in cutting fuel subsidies and should seek to lessen the impact on kerosene prices as this directly hits poorer households, International Monetary Fund representative to Indonesia, John Dodsworth said Tuesday.

Despite its image as a free-market advocate, the IMF had cautioned against rapid cuts in fuel subsidies in the budget for financial year 2000, he said. "Kerosene is a difficult one because in rural areas it's used for lighting and cooking and that will go up a lot in April," he told a press luncheon.

Fuel prices will rise by an average 12% when some subsidies are lifted April 1, including kerosene. However, the government has pledged to maintain prices for public transportation and plans to allow poorer households to buy kerosene at subsidized prices.

Dodsworth said he wasn't convinced of the efficiency of giving out coupons for poor households to buy cheap kerosene, as the coupons don't always reach the right people.

Raising domestic fuel prices was one of the most contentious matters in the 2000 state budget debate between the government and parliament. The government had proposed an average 20% rise in fuel prices, but lawmakers sought to limit subsidy cuts.

A sharp rise in fuel prices in 1998 helped spark riots that toppled former President Suharto and remains a highly sensitive topic in Indonesia.