Jakarta increases fuel prices

JAKARTA, Indonesia -- Dramatic fuel price increases took effect yesterday as Indonesia sought to revive its beleaguered economy, sparking transit strikes that left thousands stranded and protests from people who have long enjoyed some of the most inexpensive gasoline in the world.

Some demonstrators burned tires and effigies of President Susilo Bambang Yudhoyono, while others blocked roads.

The government, reacting to soaring oil prices, announced that the prices of gasoline would rise 87 percent to $1.67 a gallon, the price of diesel fuel would more than double, and the price of kerosene would triple.

The increases will push up the price of everything from rice to cigarettes in this sprawling archipelago of 220 million people, half of whom live on less than $2 a day.

The sizes of the increases, much larger than expected, caught many by surprise. But economists said the government's bold move may help balance Indonesia's budget, which includes billions of dollars a year in fuel subsidies.

Yudhoyono said he hoped the move would help to stave off an economic crisis. The stock market and the local currency, the rupiah, have been hit hard in recent weeks by economic uncertainties.

Thousands have protested, but the rallies were small given the size of the country and its history of massive street demonstrations. There were reports of violence, with students burning tires in South Sulawesi Province following an all-night protest.

Demonstrators in Riau briefly commandeered a diesel truck, and a crowd on the island of Lombok, in neighboring Bali, burned effigies of Yudhoyono and Vice President Yusuf Kalla. But in the capital, Jakarta, only a few busloads of student protesters were seen. ''I understand that the government had little choice," said Atika Sari, a 30-year-old teacher in Yogyakarta. ''But how can we survive?"

Indonesia is Southeast Asia's only member of the Organization of Petroleum Exporting Countries, but it has to import oil because of decades of declining investment in exploration and extraction.

For years it has subsidized the price of fuel, but with global oil prices at about $65 a barrel, it was seen as unsustainable.

The subsidies have eaten up nearly a quarter of the budget this year at a time that education and health are underfunded.

Fuel price increases are a sensitive issue in Indonesia, where a big hike in 1998 triggered rioting that helped topple a dictator, Suharto. Protests also forced former president Megawati Sukarnoputri to scale back a fuel price increase in 2002.

This is the second time that Yudhoyono has pushed up prices.

More than 15 million low-income families are being offered a lump-sum compensation of $29. Hundreds waited in lines at post offices yesterday to pick up the cash.