The Indonesian government rang in October with a very steep fuel price hike effecting on Saturday by an average of 126.6 percent amid a relatively minor clash, sporadic protests and long lines at gas stations.

Coordinating Minister for Economy Aburizal Bakrie announced here late Friday night that the price of premium (subsidized) gasoline stood at 4,500 rupiahs (about 44 US cents) per liter from 2,400 rupiahs (about 23 US cents), diesel at 4,300 rupiahs (about 42 US cents) per liter from 2,100 rupiahs (about 20 US cents) and kerosene, mostly used for cooking in low-income households, at 2, 000 rupiahs (about 19 US cents) per liter from 700 rupiahs (about 6 US cents).

The increase was far higher than expected as government officials previously estimated that the price would go by between 50 percent and 80 percent.

Kerosene, which most directly affects the poor, was the highest increase.

Apart from the fuel prices, the government also issued five incentive packages, which included discounts for certain products, trade reform regulations, public transportation reform, an increase in the minimum price of unhusked rice paid to farmers and a direct subsidy for the poor.

The unpopular decision came after President Susilo Bambang Yudhoyono won approval from the House of Representatives in a 273- to-83 vote, to drastically cut the fuel subsidy expenditure, therefore stopping the bleeding from the year's budget.

As the archipelago has become a net oil importer amid rising fuel consumption, declining oil production and soaring global oil price recently hit 70 US dollars a barrel, the fuel subsidies would have ballooned well over 110 trillion rupiahs (about 10 billion US dollars) to keep the fuel prices at their current levels.

"It is not an easy choice. I understand that this is a bitter pill but I have to do it to save the country's future," said Susilo earlier on Friday.

Meanwhile, Susilo ensured citizens that the government would mitigate the inflationary knock-on effects of the hike by giving money and other benefits directly to the poor.

The government earlier this week transferred 1.7 trillion rupiahs (about 160 million US dollars) of an allocated 4.65 trillion rupiahs (about 450 million US dollars) to the Ministry of Social Services, which later transferred the funds through government-appointed institutions to some 15.6 million low-income households.

Each household will get 300,000 rupiahs (about 28 US dollars) each quarter over the next year. Eligible recipients are those living on or below the poverty line with an individual monthly income of less than 175,000 rupiahs (about 15 US dollars).

The fuel price hike has been the second within this year, also the second for Susilo since he took the presidency last October, after the March 1 increase by an average of 29 percent.

Also in March, the government spared 17 trillion rupiahs (about 1.6 billion US dollars) to ease the plight of the poor. With the new package of aid, the total bill for this year's extra benefits for the poor will reach 30 trillion rupiahs (about 2.9 billion US dollars).

Source: Xinhua