Indonesia raises subsidized fuel prices 30 percent; Labor Party plans protests

Indonesia increased fuel prices by around 30 percent on Saturday, slashing spending on rising subsidies despite the risk of mass protests, even as experts said the hike could jeopardize any economic recovery from the COVID-19 pandemic.

The price of subsidized petrol was hiked to 10,000 rupiahs (U.S. $0.67) a liter from 7,650 (U.S. $0.51) rupiah, while the cost of subsidized diesel was hiked to 6,800 rupiahs a liter from 5,150 rupiahs, said Indonesian President Joko “Jokowi” Widodo. The price increases went into effect Saturday at 2:30 p.m.

Jokowi said the subsidy budget had gone up more than three times to 502.4 trillion rupiahs (U.S. $34 billion), as global fuel prices had skyrocketed.

“I actually wanted domestic fuel prices to remain affordable by providing subsidies, but the budget for subsidies has tripled and will continue to rise,” the president told a news conference in Jakarta.

“This [fuel price hike] is the government’s last option.”

These price increases are the first since 2014, when a 30 percent hike in fuel prices led to nationwide protests and strikes by students and transport operators. Citizens here see subsidized fuel as a public service obligation, says the Asian Development Bank, and fuel price increases are a very sensitive issue that has caused riots in the past.

Already, the Labor Party and some labor organizations have threatened to hold protests in several cities across the country on Sept. 6.

Said Iqbal, the chairman of the Labor Party, said the price increases would hit workers hard, especially factory workers, who have not received salary increments for the past three years.

He also said there mass layoffs may now occur as companies try to increase their bottom line following the fuel price increase.

“If the protest on Sept. 6 remains unheard by the government and the parliament, the Labor Party and the Confederation of Indonesian Trade Unions (KSPI) will organize a follow-up action,” he said.

Over the past few days, there have already been small protests in several cities after news emerged that fuel prices would be hiked, reported Reuters news agency.

For its part, the government has planned handouts to cushion the impact of the fuel price rise, said Minister of Finance Sri Mulyani Indrawati, at the same press conference as Jokowi.

She said the government is allocating a portion of the fuel subsidy, 12.4 trillion rupiahs, as direct cash aid for 20.65 million families in need.

Additionally, she announced 9.6 trillion rupiahs in wage subsidies for 16 million workers with monthly salaries below 3.5 million rupiahs.

“We also ask the local governments to use 2 percent of the general transfer funds for public transportation, online bike taxis, and fishermen assistance,” said Jokowi.

Minister of Social Affairs Tri Rismaharini said the direct cash aid would be distributed in two parts, in September and in December. He said the government has also designated a registration period for people in need of financial assistance.

“People can file requests for assistance, and we will be checking with our assistants. We have 70,000 assistants,” said Rismaharini.

Agencies