JAKARTA — The Indonesian House of Representatives was meeting Monday to debate a revised budget that includes a highly contentious increase in the price of subsidized gasoline, which has been rejected by opposition lawmakers and has drawn protesters into the streets of the capital.
President Susilo Bambang Yudhoyono’s government wants to raise gasoline prices by 44 percent, from 4,500 rupiah, or 45 U.S. cents, a liter, or 0.26 gallon, to 6,500 rupiah to help close a widening budget deficit. The country’s Finance Ministry has said spending on fuel subsidies could reach $23 billion in 2013, compared with about $20 billion last year, if urgent action is not taken.
Amid heavy rain, thousands of protesters, including members of labor groups and students, staged rallies Monday outside the national legislative complex in south Jakarta and across the city to voice opposition to any price increases.
International lenders like the World Bank have urged the Indonesian government to eliminate subsidies altogether, as savings could go to crucial social programs, including health care, as well as much-needed infrastructure investment.
However, with national legislative elections scheduled for April 2014 and a presidential election three months later, fuel subsidies are a hot-button political issue. The Indonesian Democratic Party of Struggle, the country’s largest opposition party, has rejected any plan to raise gasoline prices. However, Mr. Yudhoyono’s governing coalition appears to have the backing it needs in the legislature, and a vote is expected by Monday evening.
The revised budget includes renewal of a cash compensation program for poor Indonesian families to cushion the blow from the subsidy decision and a resulting increase in inflation, as was done when gasoline prices were raised in 2008.
Although Indonesia has a plenty of oil production fields and is among the top 25 oil-producing nations in the world, it is a net importer of petroleum. Gasoline is so heavily subsidized that at the end of 2012, the country had the lowest fuel prices of any net oil-consuming nation in the world, according to the World Bank. The second-lowest was the United States, where a gallon sold for $3.29 on Dec. 31 — nearly twice as much as in Indonesia.
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