Indonesia president defends fuel hike plan after protests

AFP, Tuesday 18 Jun 2013

Thousands protest in Jakarta and nationwide as Indonesian lawmakers approve plan to reduce fuel subsidies expected to raise the price of fuel by an average of 33 percent

Indonesian President Susilo Bambang Yudhoyono on Tuesday defended his government's plan to hike fuel prices for the first time since 2008, a day after police battled demonstrators outside parliament.

Thousands protesting the plan to reduce fuel subsidies fought running battles with police firing tear gas and water cannon Monday, as lawmakers approved measures paving the way to lower the payouts in Southeast Asia's top economy.

But Yudhoyono insisted escalating public anger at an expected price increase of more than 30 percent would not deter his government from pushing through the sorely-needed measure.

"We want to protect our macro economy," he said during a speech in Jakarta. "This is important -- it concerns us all."

Yudhoyono, who is expected to announce a hike in the coming days after parliament voted through a revised budget, also insisted that the government was "being forced into hiking fuel prices to cope with rising crude oil prices".

Economists have long been calling for Indonesia to reduce the subsidies, which eat up a huge chunk of the budget and are blamed for a widening current account deficit, but the government has in the past backed down in the face of public anger.

Protesters took to the streets again on Tuesday but fewer than the previous day, when thousands demonstrated in the capital Jakarta and across the country.

Several hundred protested in front of the office of state energy firm Pertamina in Medan, on Sumatra island, while small groups of demonstrators set tyres alight and blocked roads in other cities. Jakarta was quiet.

Meanwhile, reports started emerging that people were stockpiling subsidised fuel in anticipation of a price hike.

Police in West Java and Lampung provinces seized thousands of litres of fuel that people had allegedly been hoarding, while Pertamina said sales had increased three to four percent in recent days.

The price of fuel is expected to increase on average 33 percent, with petrol jumping from from 4,500 rupiah ($0.46) a litre to 6,500 rupiah, and diesel from 4,500 rupiah to 5,500.

Following a marathon parliamentary session on Monday, lawmakers agreed on a revised budget that included a package of measures to compensate the millions of poor people likely to be hit hardest.

Poor households will receive $15 a month each for the next four months to offset the impact of the fuel hike, which is expected to cause the cost of everyday goods to go up as they will be more expensive to transport.

Yudhoyono had insisted on the measures before any fuel hike, which will come at a sensitive time as parties gear up for elections in 2014.

Eight thousand people demonstrated across Jakarta during the debate, with thousands outside the national parliament hurling Molotov cocktails, fireworks and bottles at police in riot gear, who fought back with tear gas and water cannon.

One person received a minor injury, while at least 14 others were injured in protests across the country.

Yudhoyono has been seeking to lower the huge subsidies for some time and last year came close. But parliament rejected the measure in the face of huge protests, which were bigger and more violent than this year's.

As demand for fuel has increased, the government has been forced to pay increasingly bigger bills to cover the subsidies, causing the current account deficit to expand.

The urgency for action increased this week after the rupiah, which had already lost value due to the ballooning deficit, plunged to four-year lows after a sell-off on emerging markets that hit Indonesia hard.

 

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