Indonesia clashes over fuel hike

Police scuffled with demonstrators ahead of the announcement

Angry protests have continued in Indonesia after the government more than doubled the average price of fuel.

The price hike, which is significantly higher than expected, is designed to cut Indonesia's massive fuel subsidy bill and help balance its budget.

President Susilo Bambang Yudhoyono urged people to stay calm, as mobs burnt tyres and effigies in protest.

Police reportedly fired tear gas at about 200 students in Jakarta who were throwing stones and burning tyres.

The new prices came into effect at midnight local time (1700 GMT), shortly after they were announced by ministers.

FUEL RISES Prices have risen by an average of 120% overnight 1 litre unleaded petrol rises from 2,450 Rupiah (24 US cents) to 4,500 (44 US cents) 1 litre kerosene climbs from 700 Rp (7 cents) to 2,000 (20 cents) Government spending third of budget on fuel subsidies, due to weak Rp and high global prices Some 15m poorer families will each get 300,000 Rp ($30) in compensation Oil price hikes contributed to fall of President Suharto in '98 In pictures: Fuel protests Press dismay at hike

A litre of kerosene, used by millions of Indonesians for cooking, will now cost 20 US cents - an increase of 186%. The price of petrol will also shoot up by 87.5%.

The increases will have a knock-on effect on the price of everything from rice to cigarettes.

The government hopes to defuse some of the protests by making direct payments to 15 million poorer families, who will be worst hit by the rise in kerosene prices.

Long queues were reported outside post offices on Saturday as people waited to collect their payments.

Also on Saturday, effigies of President Yudhoyono and Vice President Yusuf Kalla were set alight by protesters on Lombok island.

The BBC's Tim Johnston in Jakarta says it remains to be seen if the protests that have been simmering over the past few days increase in volume and violence.

Police outside a university campus in the capital fired warning shots at protesters that appeared to be blanks, El Shinta radio reported on Friday, and hit some of the demonstrators with sticks, according to the Associated Press.

The protests followed widespread demonstrations in at least eight cities on Thursday.

Budget crisis

Indonesia has some of the most generous fuel subsidies in Asia, a throwback to its days as a net oil exporter.

Fuel subsidies currently account for about a third of all central government spending, more than the budget for health or education.

I realise that this is not a popular policy... but we have to do it to save the nation's budget and the future of the country President Yudhoyono

But the country now has to import oil, and the sharp rise in global oil prices has threatened to overwhelm the government's budget.

The situation is worsened by the country's weak currency - worries about the budget position triggered a sharp drop in the Rupiah last month.

The president announced the price rises last week, and parliament approved the plan on Tuesday by voting to cap government spending on fuel subsidies at $8.7bn.

Economists had estimated the effect of the cap would be to force some fuel prices up by 60% - a much lower rise than the figure finally announced.

Ministers argue that petrol price rises will be less painful, since they will mainly affect richer Indonesians who drive cars.

The price rises come at a sensitive time, ahead of the Muslim fasting month of Ramadan.

Successive Indonesian governments have also been wary of cutting fuel subsidies, because a 1998 hike in fuel prices helped topple former dictator Suharto.

"I realise that this is not a popular policy," President Yudhoyono said, "but we have to do it to save the nation's budget and the future of the country".