Opposition grows to Indonesia fuel price hike

Leading Indonesian political parties said on Friday they will oppose a government plan to raise fuel prices unless oil prices climb further, dealing a blow to the ruling party’s efforts to control a swelling budget deficit in Southeast Asia’s largest economy.

Published: Fri 30 Mar 2012, 3:40 PM

Last updated: Tue 7 Apr 2015, 12:24 PM

The government wants a 33 percent rise in petrol prices, currently the cheapest in Asia, from April 1 to reduce a subsidy bill that threatens to undermine the budget discipline that led rating agencies to lift the country to an investment grade status.

President Susilo Bambang Yudhoyono’s Democrat Party wants to change the law to allow a price hike if the Indonesia Crude Price (ICP), a basket of crude oil prices, rises to average more than five percent above a budget forecast for $105 a barrel. The price is currently 10 percent above that at $116 a barrel.

But the Golkar Party, part of the ruling coalition and with the second largest number of seats in parliament, said on Friday it rejected a fuel price hike and would only support it if the ICP rose 15 percent above the budget forecast.

Golkar previously supported the fuel price hike but changed its mind after a week of protests across the country. On Friday thousands of demonstrators gathered outside the parliament building and blocked access to a toll road to the airport.

Protests over a fuel price hike helped spell the end for autocratic leader Suharto in 1998, and lifting prices would hurt the bulk of the country’s 240 million people, many still living on a few dollars a day despite years of strong economic growth.

“The latest manoeuvre by Golkar is a smart calculation...this rejection of the fuel price hike could boost support for Golkar,” said Syamsuddin Haris, a political analyst from Indonesia’s Institute of Sciences.

Other parties also told parliament they rejected the hike or required a rise in the ICP price of up to 20 percent. Lawmakers are set to continue to thrash out possible options for a deal, though an April price hike now looks unlikely.

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