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Indonesia to raise fuel prices despite protests

Friday - 6/21/2013, 10:20pm  ET

Associated Press

JAKARTA, Indonesia (AP) -- 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.


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




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




Policemen were deployed to guard fuel stations across the country, where cars and motorbikes lined up Friday evening to buy fuel under the old prices. The government has ordered all stations to be open around the clock.

Aviliani, a noted economist, applauded the move, saying the subsidies have put pressure on the country's trade and current account deficits as well as local currency.


She urged the government to control prices of staple goods and the value of the rupiah currency.

To try to minimize protests, 10 mobile phone companies plan to text about 240 million cellular users to explain why fuel prices are being increased, said Gatot S. Dewabroto, the spokesman at the Ministry of Communication and Information.

He quoted one message as saying: "Fuel subsidies are not well targeted. They are being enjoyed by the rich and have created injustice."

A public information bulletin will be published in newspapers laying out the government's arguments, said Dewabroto. It notes, for example, that Indonesia's fuel prices are lower than seven neighboring Southeast Asian countries and explains that the country once was able to produce enough oil to satisfy domestic consumers but now must import fuel to meet skyrocketing demand as millions of news cars and motorbikes hit the streets each year.




Associated Press writer Niniek Karmini contributed to this report.
