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Indonesian railway to defy government and raise fares

State-owned railway operator PT KAI has decided to go ahead with its plan to increase economy class ticket fares at the beginning of September, despite a warning from the Transportation Ministry to refrain from doing so.

KAI finance director Kurniadi Armosasmito said on Sunday that the increase was inevitable because the company was receiving less money from the government, therefore it had less fiscal space to subsidize train fares as costs would soar.

The train operator saw its public service obligation (PSO) fund cut by more than a third to 871.5 billion rupiah (US$72.37 million) this year from an initial 1.2 trillion.

“The company has no budget to pay for the subsidy shortage. Therefore, without the subsidy, we have to increase fares,” Kurniadi told The Jakarta Post.

As previously reported, KAI said that the Transportation Ministry had slashed the PSO fund for economy class passengers by 352 billion rupiah.

Initially, an additional 352 billion rupiah had been allocated to compensate subsidized fuel prices on the back of the 2013 fuel-price increase, aside from this year's subsidy of 871 billion rupiah.

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