Indonesia's parliament has voted to allow the government to raise fuel prices only under certain conditions, effectively blocking a proposal for a price increase.

31 Mar 2012 - 2:28 PM  UPDATED 26 Aug 2013 - 10:48 AM

The vote came early on Saturday, after police fired tear gas and water cannon on Friday night to disperse thousands of protesters demanding the government drop plans to cut a fuel subsidy, which would mean an increase in prices.

Police took the action a few hours after protesters broke down the metal gate to the House of Representatives complex in Jakarta.

Saturday's vote means that the government can raise fuel prices if Indonesia Crude Price (ICP), a basket of crude oil prices, rises by 15 per cent on average for six months from the current forecast of US105 per barrel.

"We can confirm that there won't be a fuel price increase on April 1, 2012," said Taufik Kurniawan, a deputy speaker of the House of Representatives.

The government wants to cut the subsidy, which would increase the fuel price customers pay from 4,500 rupiah (47 Australian cents) to 6,000 rupiah (63 cents) per litre. The move is designed to reduce the burden on state finances following the sharp rise in global oil prices.

Officials said a cut in fuel subsidies is needed so that more money can be spent on health, education and infrastructure.

The ruling Democratic Party is proposing the price adjustment allowing further price changes in the future every time ICP rises by 5 per cent.

Other parties, including five other members of the ruling coalition, rejected the proposal.

Major political parties fear endorsing the fuel price hike could hurt their popularity ahead of the 2014 elections, when President Susilo Bambang Yudhoyono is no longer eligible to run after two terms in office.

Indonesians in major cities have held almost daily protests since the government announced last month that it would raise subsidised fuel prices.

On Thursday, students clashed with police in central Jakarta, leaving several people injured, including a local police chief.

Protesters also set fire to a police car.

Indonesia was a member of the Organisation of Petroleum Exporting Countries but withdrew in 2008 after becoming a net oil importer.

Indonesians fear that higher fuel prices could also push up the cost of many consumer products.