Sydney - Australia pledged Wednesday not to take 78 Sri Lankan asylum seekers rescued 10 days ago by one of its Customs patrol boats off Indonesia.

Prime Minister Kevin Rudd insisted he had struck an agreement with Indonesian President Bambang Susilo Yudhoyono in Jakarta last week that would see the group interned in Indonesia at Australia's expense.

The Sri Lankans are refusing to leave the Oceanic Viking, which is moored off Indonesia's Bintan Island near Singapore.

The leading government official on Bintan Island says there is no room for the group in its detention centre, and looks set to defy Yudhoyono on the vexed issue of what is to be done with the group.

Foreign Minister Stephen Smith insists the asylum seekers will land in Indonesia.

"The president has already made that decision," he said. "There's an agreement between Australia and the government of Indonesia that the people who were rescued in the open seas will go to Indonesia and be processed by the United Nations High Commissioner for Refugees in Indonesia."

Rudd has refused comment on the impasse other than to say that he had struck an agreement with Yudhoyono allowing the group to be taken in by Indonesia.

The recent surge in arrivals - more than 30 boats have arrived this year compared with just seven for the whole of 2008 - is proving a test for Rudd's two-year-old Labor government. He had promised a softer approach to illegal arrivals than the previous conservative government under John Howard.

Howard packed off asylum seekers who arrived by boat on outlying islands to detention centres in either Nauru or Papua New Guinea where they were processed by the UN.

Most asylum seekers arrive on small boats from Indonesia where they have paid people-smugglers to arrange their illicit passage. Sri Lanka, Afghanistan and Iraq are the main source countries. (dpa)