Steep hike in Indonesian fuel prices

Despite widespread protests, Indonesia has announced sharp hikes in domestic fuel prices to pare crippling energy subsidies that contributed to a near meltdown of the rupiah currency in August.

    Fuel costs are going up while subsidies are being cut

    Mines and Energy Minister Purnomo Yusgiantoro on Friday said the price of gasoline was raised by 87.5% to 4,500 rupiah (44 US cents) a litre; diesel by 105% to 4300 rupiah a litre and household kerosene, used for cooking, by 186% to 2000 rupiah a litre. ($1=10,300 rupiah)


    The increases take effect on Saturday. 


    Earlier, riot police fired tear gas at rock-throwing students who were among thousands demonstrating on the eve of fuel price increases, which Indonesia's president defended as the only way to stave off an economic crisis.

    Security forces on Friday chased down more than 100 demonstrators in the centre of Jakarta, hitting some with sticks, after the youths set tyres ablaze, vandalised a bus and exchanged a volley of rocks with police on a busy street near their campus.

    Thousands demonstrated
    against the fuel price hike

    "Anarchy will only deter investment," said President Susilo Bambang Yudhoyono, who has made the decision to raise the price of petrol, diesel fuel and kerosene. 
    The fuel price hike is bound to push up the price of everything from rice to cigarettes in the sprawling country of 220 million people, half of whom live on less than $2 a day.

    Slashing subsidies

    The price increases follow Yudhoyono's decision to slash fuel subsidies that have helped protect Indonesia's poorest from spiralling global prices for years, but also threatened to blow the cash-strapped government's budget.

    Last year, the government doled out $7.4 billion for the subsidies -more than the international community has pledged on rebuilding efforts in countries hit by last year's tsunami.

    "I realise that this is not a popular policy, a bitter pill that we have to swallow, but we have to do it to save the nation's budget and the future of the country," Yudhoyono said.

    Thousands turned out for demonstrations in at least 17 cities nationwide, but most were peaceful, scattered and small -given the size of the country and its history of massive street rallies.

    Oil imports 

    "I realise that this is not a popular policy, a bitter pill that we have to swallow, but we have to do it to save the nation's budget and the future of the country"

    Susilo Bambang Yudhoyono, Indonesian President

    Aside from the brief clash in Jakarta, there were few reports of violence. Despite being Southeast Asia's only member of Opec, Indonesia imports oil because of decades of declining investment in exploration and extraction due to corruption and a weak legal system that makes people wary of doing business here.
    Most in Indonesia agree the current subsidies - which allow Indonesian motorists to fill up for less than 25 US cents a litre (95 cents a gallon) - are unsustainable.

    Still, raising prices is a sensitive issue in Indonesia, where a massive increase in 1998 triggered rioting that helped topple former dictator Suharto. Protests also forced former President Megawati Sukarnoputri to scale back a fuel price increase in 2002.

    This is the second time Yudhoyono, who was elected last year on promises to fight poverty and revive the economy, has pushed up prices. Some said he betrayed those who put him in office.

    "I'm disappointed in SBY," said Achmad Syarif, 21, referring to the president by his initials as many Indonesians do. "This is going to place a heavy burden on the people... There have to be other ways to solve the economic crisis."

    SOURCE: Unspecified


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