Fuel prices increased by about 30 per cent across Indonesia on Saturday after the government reduced some of the costly subsidies that have kept inflation in Southeast Asia's largest economy among the world's lowest.
Indonesians have been fretting for weeks about a looming increase in the price of subsidised Pertalite RON-90 gasoline sold by Pertamina, the state-owned oil and gas company.
Long lines of motorbikes and cars snaked around gas stations as motorists waited for hours to fill up their tanks with cheaper gas before the increase took effect on Saturday.
The hike the first in eight years raised the price of gasoline from about 51 cents to 67 cents per litre and diesel fuel from 35 cents to 46 cents.
President Joko Widodo said the decision to increase the fuel prices was his last option as the country's energy subsidy had tripled this year to 502 trillion rupiah (USD 34 billion) from its original budget, triggered by rising global prices of oil and gas.
The government has tried its best as I really want fuel prices to remain affordable, Widodo told a televised address announcing the fuel hike. The government has to make decisions in difficult situations.
He said that the flow of subsidies to the public was not well targeted about 70 per cent of subsidies were benefiting middle and upper classes and the government decided instead to increase social assistance.
Finance Minister Sri Mulyani Indrawati said authorities were monitoring the impact on inflation and economic growth of the rise in fuel price.
Inflation has been relatively modest with the shock being mostly absorbed through a budget bolstered by energy subsidies. Inflation hit 4.6 per cent in August as Bank Indonesia, the central bank, has said it would reassess the inflation outlook in response to the government fuel price policy.
Indrawati said in a separate news conference that the government would provide 150,000 rupiah (USD 10) cash handouts to cushion the impact of the fuel price increase on 20.6 million poor families until the year end.
The total cost of the handouts will be 12.4 trillion rupiah, which will be reallocated from the budget for energy subsidies.
She said the government will also spend 9.6 trillion rupiah (USD 644 million) on salary assistance to about 16 million low paid workers, and 2.17 trillion rupiah (USD 145 million) will go to subsidising transport costs, particularly for motorcycle taxi drivers and fishermen.
We hope this can reduce pressure of rising prices and help reduce poverty, Indrawati said.
The government has subsidised fuel for decades in Indonesia, the vast archipelago nation of more than 270 million people.
Fuel prices are a politically sensitive issue that could trigger other price hikes and risk student protests. In 1998, an increase in prices sparked riots that helped topple longtime dictator Suharto.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
You’ve hit your limit of {{free_limit}} free articles this month.
Subscribe now for unlimited access.
Already subscribed? Log in
Subscribe to read the full story →
Quarterly Starter
₹900
3 Months
₹300/Month
Smart Essential
₹2,700
1 Year
₹225/Month
Super Saver
₹3,900
2 Years
₹162/Month
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Access to Exclusive Premium Stories Online
Over 30 behind the paywall stories daily, handpicked by our editors for subscribers


Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share


Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor


Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements


Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app