Protests break out as Indonesia vows to slash fuel subsidies

Dec 23, 2004 01:00 AM

Protests over sharp increases in fuel costs broke out in Indonesia as officials insisted they had no choice but to slash subsidies that could see consumers hit by a 40 % price hike.
Students at several universities in the capital gathered to wave placards and chant slogans at government plans to withdraw the subsidies which they said put fuel beyond the budget of most in the largely impoverished country. In one protest at Jakarta's Mercu Buana university, protestors hijacked a petroleum truck.

Vice President Yusuf Kalla apologised as he explained that a price rise already imposed on LPG and high grade gasoline would also be extended to include most other fuels due the high cost of oil.
"I ask for forgiveness but it must be understood that we cannot subsidise these continuously, with the exception of kerosene," Kalla told. Kerosene is a crucial fuel widely used for cooking by the poor so any changes there would have an immediate impact.

Kalla said that the 41 % rise in liquefied gas and high grade gasoline could not have been prevented as the state oil and gas company Pertamina was already suffering from huge losses as global crude prices soared.
"Pertamina can no longer face its cashflow difficulties due to its losses. It should be understood that as a state company it can no longer bear those loses," Kalla said. He also denied that the increase in fuel prices had led to a rise in prices for essential goods, instead blaming overseas costs and climate problems for bumping up the price of rice, sugar and vegetables.

Indonesia has been under pressure to slash huge fuel subsidies that are draining cash earmarked for development programmes but it has been reluctant largely because previous cuts in 1998 had led to civil unrest. The initial increase in liquefied gas and high grade gasoline has already sparked small-scale protests in parts of the country.
Meanwhile, Economics Minister Aburizal Bakrie said the government would in 2005 allot up to 10-15 tn rupiah ($ 1.61 bn) to alleviate the effects of the price rise on the poor.
"This compensation fund will be used... firstly for health, for education, thirdly for infrastructure and fourthly for rice-for-the-poor program," Bakrie said.

Source: Agence France Presse
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