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TheStreet Open House

Indonesia To Raise Fuel Prices Despite Protests

By ALI KOTARUMALOS

JAKARTA, Indonesia (AP) â¿¿ Indonesia announced a fuel price increase of up to 44 percent late Friday, reducing the costly subsidies that have kept pump prices in Southeast Asia's largest economy among the world's lowest.

Long lines of motorbikes and cars snaked around gas stations as motorists waited to fill up their tanks with cheaper gas before the increase takes effect after midnight.

The subsidies are a significant drain on the country's budget. The budget approved Monday sets the 2013 fuel subsidy at $20.2 billion â¿¿ nearly 4 percent of total economic output.

By comparison, the government aims to spend $20 billion on infrastructure in 2013.

The new budget also has more than $900 million in cash handouts to cushion the impact of the fuel price increase on 15.5 million poor families over four months. President Susilo Bambang Yudhoyono asked lawmakers to approve a plan that would ensure the country's poorest people were not left unprotected.

"The prices are applicable simultaneously across Indonesia," Mines and Energy Minister Jero Wacik said in announcing the increase.

The increase â¿¿ the first in five years â¿¿ will raise the price of gasoline from about 45 cents to 65 cents per liter and diesel fuel from 45 cents to 55 cents.

Coordinating Economic Minister Hatta Rajasa said the hike was actually an adjustment as the country has to spend nearly $30 billion on fuel imports, while about 70 percent of subsidies were merely enjoyed by middle and high classes.

"This is a very difficult choice and the last alternative to be taken by the government," Rajasa said before the announcement.

Thousands of students and workers took to the streets across the country up to Friday protesting the plan to sharply raise fuel prices. Some held protests Friday night in the capital Jakarta and some other cities.

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