KUWAIT: The Cabinet yesterday decided to raise petrol prices by more than 80 percent from September 1 as part of economic reforms aimed at countering falling oil revenues. A statement after the weekly Cabinet meeting said the price of low octane petrol will rise by 41 percent to 85 fils a litre from 60 fils, while high grade petrol will increase by 61 percent to 105 fils from 65 fils. These two types account for most of the petrol consumed in the country. It also decided to raise the price of environmentally friendly low-emission "ultra" petrol by 83 percent to 165 fils a litre from 95 fils. The increase is applicable to all motorists in the country.

The ministers were briefed about recommendations presented by the economic affairs committee - tasked with revising various state subsidies - on setting fuel prices. They approved the commission's recommendation and decided to begin rationalizing subsidies on gasoline in the country, as part of the government's reform scheme where fuel products' prices will be restructured to be in harmony with the average rates in other GCC states.

These are the first increases in heavily subsidized petrol prices in Kuwait for almost two decades. The Cabinet said that even with the new increases, the subsidy on petrol has not been completely lifted. The government liberalized the prices of diesel and kerosene in Jan 2015 and revises their prices monthly. Kuwait is the last country among the energy-rich Gulf Cooperation Council states to increase the price of petrol. Other GCC members - Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates - have either completely liberalized fuel prices or raised them substantially because of the sharp fall in oil income since mid-2014.

The Cabinet said a government committee will revise the new petrol prices every three months depending on international oil prices. In April, parliament approved a government-sponsored bill to raise electricity and water prices paid by foreign residents and businesses, but exempted citizens. This increase, the first in almost 50 years, will take effect from September next year. Kuwait has posted a budget deficit of $18.3 billion in the past fiscal year, according to provisional figures, following 16 years of windfall due to high oil prices. It is projecting a deficit of $29 billion in the current 2016/2017 fiscal year. The state is home to 1.3 million native citizens and around three million foreigners.

The petrol price increase is expected to trigger increases in the prices of many commodities and services, especially those transported by trucks using petrol. A wave of price hikes swept the country in early 2015 after the government liberalized the prices of diesel and kerosene. Activists, who were surprised by the decision, launched a campaign against the hike on Twitter, with some saying that citizens should have been given some financial compensation. Others said citizens should have been exempted from the increase, which like power and water, should have targeted expats.

MP Saleh Ashour criticized the decision and blamed the three ministers in the Cabinet who are also elected lawmakers. He said they should have resigned because of the large-scale squandering in the budget and the billions of dinars of foreign aid by the government. The lawmaker said this government does not deserve to stay in power following this decision, which comes immediately after the commerce and industry ministry abolished a decision banning artificial price increases, which will allow prices of commodities to rise.

By B Izzak