Jakarta – Indonesian legislators have cleared the way for a controversial rise in fuel prices this weekend, slashing petrol subsidies despite growing public anger over the move.
Police said they were bracing for anything from street protests to fuel-truck thefts before the price rise, which has been imposed to battle a budget shortfall, comes into force on Saturday.
President Susilo Bambang Yudhoyono's government has not yet announced how much it would raise the price of petrol, currently heavily subsidised by the state to keep the street price at around 2,400 rupiah (23 US cents) per litre.
Lawmakers voted more than three-to-one late Tuesday to back the plan and restrict subsidies this year to 89.2 trillion rupiah (8.7 billion dollars), much less than would have been paid due to soaring global oil prices.
"Frankly speaking, the figure of 89.2 trillion rupiah is still too large for Indonesia," said Emir Moeis, chairman of the House of Representatives budget commission. "The government could use the money for public infrastructure developments," he said.
Officials have said some 16 million households will get short-term compensation but anger has been mounting across this archipelago nation of 220 million people.
Student protests kept Yudhoyono from attending a university ceremony on Tuesday while relatively low-key demonstrations have been held in many parts of the country, mostly by students and transport drivers.
In the capital Jakarta, police chief Firman Gani said around 5,500 personnel were deployed to guard 14 strategic locations around the city, including the presidential palace, the parliament and a major fuel depot in north Jakarta.
Police were also guarding petrol stations to anticipate potential security threats, including the hijacking of fuel trucks and station takeovers, Gani said.
The coming price increase, the second this year, has also sparked long queues and shortages and dealers said it helped push the rupiah lower in Wednesday's trading.
Although the move is unpopular, particularly among the poor who rely on public transport and kerosene for cooking, many analysts say a cut in subsidies is an economic necessity.
High global oil prices have dealt government finances a double blow. The government has had to snap up dollars to buy more expensive fuel, putting the rupiah under pressure, but also has to support increased subsidies to keep domestic fuel prices artificially low.
Limiting the fuel subsidy spending to 89.2 trillion rupiah for 2005 will keep the budget deficit at 0.9 percent of gross domestic product, analysts say.
Premium, the most commonly used automotive fuel here, currently sells at an official price of 2,400 rupiah per litre but local media reported that roadside sellers outside Jakarta were selling it at about three times that.
Top security minister Widodo Adi Sucipto said Tuesday the government would study the fuel shortage reports to see "whether they are really caused by a high demand or because of hoarding." Bank Mandiri currency analyst Doddy Arifianto warned that a price increase of above 50 percent could trigger social unrest.
Uncertainty about the size of the increase was among the reasons for the pressure on the rupiah, which at noon was at 10,315/10,325 to the dollar, down from Tuesday's 10,270/10,280.