Indonesians face fuel price rise

Indonesia's government has confirmed it is considering raising fuel prices by as much as 30%.

Millions of Indonesians use kerosene for basic cooking, and prices have been heavily subsidised for years. President Susilo Bambang Yudhoyono's government has said it wants to curb fuel subsidies and direct the money into aid programmes for the poor. But critics argue cutting subsidies will hurt the poorer families that his government says it wants to help. Millions of people were left homeless in Indonesia Aceh's region following the earthquake and tsunami disaster in late December.

Indonesia pays subsidies to importers in order to stabilise domestic fuel prices, but higher oil prices have forced the government to spend more on holding prices down. It spent 59.2 trillion rupiah ($6.58bn; £3.5bn) on fuel subsidies in 2004, a sum far in excess of its original projection of 14.5 trillion rupiah. Since President Yudhoyono's government came to power in October, it has indicated its intention of raising domestic fuel prices by cutting subsidies. "The (January to March) quarter of this year is the best time for us to increase fuel prices," said Sri Mulyani Indrawati, State Minister for National Development Planning. "We are still considering if a 30% hike is suitable at the moment. The sooner the better for the state budget." The BBC's correspondent in Jakarta, Rachel Harvey, told World Business Report that there was likely to be a strong public reaction to any price rise. "The big question is whether they go for one big, short, sharp shock and raise prices between 20% and 30% or whether they try to stagger it," she said. Indonesia's previous government, led by President Megawati Sukarnoputri, also attempted to cut subsidies in 2003, but was forced to back down in the face of public protests.
