Public to pay 40% more on fuel<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The public will pay up to 40 percent more for fuel by early next
\nyear, as the government insists on raising the price of the
\ncommodity in order to lower subsidy costs, Vice President Jusuf
\nKalla said on Tuesday.<\/p>\n
The government has been facing increasingly higher subsidy
\ncosts, which has been soaring due to red-hot global oil prices.<\/p>\n
\"(The price hike is) projected to be about 40 percent,\" Kalla
\nsaid on the sidelines of a seminar, adding that the government
\ncould no longer afford to shoulder greater subsidies for the
\ncommodity, which is largely enjoyed by car owners.<\/p>\n
With the government maintaining fuel prices through the year,
\nsome Rp 10 trillion per month of the budget needed to be set
\naside for the subsidy, he said.<\/p>\n
\"That's the largest subsidy ever covered by the government in
\nthe history of this country.<\/p>\n
\"It is high time for the government to move away from populist
\nmeasures that come at the expense of most people,\" said Kalla.<\/p>\n
In the past, any effort by the government to raise fuel prices
\nin order to cut down on the subsidy sparked protests, which often
\nturned violent.<\/p>\n
The sensitivity of the issue is such that former president
\nMegawati Soekarnoputri decided against a price increase this year
\nto preserve peace during the general elections.<\/p>\n
However, concerns have been growing over the subsidy policy
\namid the surging global price of oil, which rose to an historic
\nhigh of over US$55 per barrel several weeks ago before sliding
\nrecently.<\/p>\n
On Monday, oil prices rose again with the North Sea Brent
\nblend jumping by $1.18 a barrel to $45.75 and U.S. crude by 32
\nU.S. cents to $49.76.<\/p>\n
The fuel subsidy is estimated to reach a whopping Rp 59.2
\ntrillion this year on the back of the global oil price, against
\nan initial projection of Rp 14.5 billion. In comparison, Rp 71.9
\ntrillion has been budgeted for development spending this year.<\/p>\n
The latest finance ministry data showed that the fuel subsidy
\nhas cost the government more than Rp 46 trillion as of Nov. 23.<\/p>\n
In addition to being a huge burden on the cash-strapped
\nbudget, the fact that the subsidy is enjoyed largely by the haves
\n-- and that it has encouraged the smuggling of subsidized fuel
\noverseas due to wide price disparities -- has added pressure on
\nthe government to review the scheme.<\/p>\n
A World Bank survey confirms that the subsidy scheme benefited
\nthe rich five times more than it did the poor.<\/p>\n
Assuming a 2005 global oil price at $24 a barrel, the state
\nbudget has allocated a Rp 19 trillion fuel subsidy.<\/p>\n
Minister of National Development Planning Sri Mulyani
\nIndrawati assented that a fuel price hike of 10 percent to 40
\npercent was imminent next year, and that a government team was
\nstudying a modified, pro-poor subsidy scheme to replace the
\nexisting one.<\/p>\n
However, Mulyani said any changes to the subsidy scheme would
\nbe consulted first with the House of Representatives before
\nenacting.<\/p>\n
Both Kalla and Mulyani said the provision of direct subsidies
\nto the poor -- meaning additional subsidies in education, health
\ncare and others would be provided in exchange for fuel subsidy
\ncuts -- was among the options being studied.<\/p>",
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