Sat, 05 Mar 2005

Government plans to subsidize public transportation

The Jakarta Post, Jakarta

In response to the public outcry over moves by some public transportation owners to raise fares following the fuel price increases, President Susilo Bambang Yudhoyono said on Friday the government would subsidize public transportation.

The subsidy would ease the financial burden on public transportation users not eligible for low-income assistance funds from the government.

During an unannounced visit to Merak and Labuan ports in Banten on Friday, Susilo said the subsidy was necessary because the fuel price hike, which came into effect on March 1, had driven up transportation fees.

"We see the need for additional funds to reduce the cost of public transportation for the poor. We believe we can provide a subsidy although we have not allocated for it in the state budget," he said as quoted by Antara.

Susilo did not announce the size of the planned subsidy, saying it required further discussion with the Ministry of Finance and the House of Representatives.

The government announced on Feb. 28 it was cutting the fuel subsidy, resulting in an average increase in fuel prices of 29 percent. The subsidy was slashed to reduce the burden on the state budget, encourage more efficient fuel usage and prevent fuel smuggling.

To help offset the impact of higher fuel prices, the government has promised to channel Rp 17.8 trillion (US$1.95 billion) saved from cutting the subsidy into programs targeted directly at the poor.

Susilo said the money for the transportation subsidy would not be taken from the funds destined for the low-income assistance programs, which will include a scholarship program, the purchase of subsidized rice for the poor, the construction of rural infrastructure and health programs.

Minister of Transportation Hatta Radjasa has ordered land transportation operators not to raise their fares by more than 10 percent. However, many of the operators have raised fares by an average of between 20 percent and 35 percent.

There have been nationwide protests over the fuel hike policy, but they have been lessening in intensity.

Of the 10 factions in the House of Representatives, eight also rejected the government's decision to raise fuel prices.

Vice President Jusuf Kalla said the government was more than ready to face an inquiry by the House of its fuel hike policy.

"The government is ready to provide sufficient data and information to the House to support our decision," he said at his office.

Legislators from seven factions asked the House speakers on Thursday to employ the legislative body's right of investigation to launch an inquiry into the fuel hike policy.

The lawmakers accused the government of violating Law No. 36/2004 on the 2005 state budget and Law No. 17/2004 on state finances, by failing to involve the House in revising budget allocations in cutting the fuel subsidy.

Kalla denied the accusation, saying the government had done nothing illegal.

"The government had to make adjustments to the state budget following the sharp increase in global oil prices, which rose much higher than our assumption in the state budget," he said.

"The government was not required to seek the House's approval to make this decision. If we have to get approval from the House before making any decision, the state will not be able to run efficiently," said Kalla, adding that the government would discuss budget revisions with the House next month.