May 31, 2012 / 5:21 AM / 5 years ago

UPDATE 2-Indonesia river blockade eases, coal barges flow

3 Min Read

(Updates throughout)

By Fergus Jensen

JAKARTA, May 31 (Reuters) - Indonesians demanding more subsidised fuel have eased a blockade of the rivers used to ship coal out of the main producing region, an official said on Thursday, defusing another protest that highlighted income inequality in the booming economy.

Rising commodity exports are contributing to strong economic growth in Indonesia and creating millionaires faster than anywhere else in the world, but workers have pushed for a greater share of the wealth through a series of violent protests and strikes in the past year.

Indonesia is the world's biggest thermal coal exporter and hundreds of activists had used small boats to block the Mahakam and Barito rivers in Kalimantan province which are used to transport at least 15 percent of the total coal output.

The protesters wanted to pressure the government to allocate more subsidised vehicle fuel to their resource-rich province, where motorists are queuing for hours at fuelling stations for cheap petrol.

The blockade, however, failed to stop coal shipments by Kalimantan's main miners, with officials from Bayan Resources , Indo Tambangraya Megah and Harum Energy saying that cargoes were flowing out unhindered.

"We had a few barges held at the Mahakam bridge at Samarinda by demonstrators demanding the government increase the allocation for the subsidised fuel," said Alastair McLeod, chief financial officer at Bayan Resources.

"It is all back to normal, and all the barges that were delayed have already departed for their respective ports."

The Politics of Cheap Fuel

The central government has restricted supplies of subsidised fuel, which costs nearly half as much as regular fuel, to try to stop a surge in oil prices hurting its budget deficit.

The governors of Kalimantan, who had threatened to cut off resource exports if their region did not get more cheap fuel, had recently lobbied officials in Jakarta, but it was not immediately clear if the government had ceded to their demands.

The head of the Indonesian Coal Mining Association, however, expects the government will increase the subsidied fuel quota to Kalimantan. "I don't think the situation will take much longer to stabilise," said Supriatna Suhala.

Protests over fuel price hikes contributed to the downfall of autocratic leader Suharto in 1998, and the issue remains politically sensitive in a nation where 30 million, or over 12 percent, of the population is poor.

The parliament rejected a government proposal to ease fuel subsidises in April and the government has since backtracked on measures requiring large private cars to only use non-subsidised fuel.

An executive at Indo Tambangraya Megah said protesters were still trying to stop fuel barges heading up the river. Resource firms have also been using subsidised fuel. (Additional reporting by Michael Taylor and Janeman Latul; Writing by Neil Chatterjee; editing by Miral Fahmy)

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