Indonesia bites the bullet on fuel prices as subsidies soar

JAKARTA Sept 3 (Reuters): Indonesian President Joko Widodo on Saturday raised some fuel prices by around 30% to contain ballooning spending on energy subsidies in Southeast Asia's biggest economy.

The move risks sparking protests and further fanning price pressures, though analysts saw a need to act to ensure fiscal discipline.

Indonesia raised the price of its most popular 90-octane gasoline, known as Pertalite, to 10,000 rupiah ($0.6714) per litre, up

from 7,650 rupiah. The finance ministry said state energy firm Pertamina's production costs for this type of fuel was 14,450 rupiah per litre.

The price of diesel rose to 6,800 rupiah per litre, from 5,150 rupiah, compared with a production cost of 13,950 rupiah.

Jokowi, as the president is popularly known, also hiked the price of 92-octane gasoline, known as Pertamax, to 14,500 rupiah per litre, from 12,500 rupiah. Pertamina does not receive compensation for losses in Pertamax sales.

The government has already tripled its energy subsidy spending this year from the original budget to 502.4 trillion rupiah ($33.83 billion) to keep subsidised fuel prices and some power tariffs unchanged amid high global energy prices.

This has resulted in a widening price disparity between subsidised and non-subsidised fuel, prompting consumers to switch to cheaper fuels.