Mon, 07 Mar 2005

Transport subsidy in fiscal form

Rendi A. Witular, The Jakarta Post, Jakarta

The government says it is preparing a package of subsidies for bus, taxi and train operators around the country to ensure that ticket prices do not rise higher than 10 percent.

Minister of Transportation Hatta Radjasa said after Sunday's Cabinet meeting that package would be in the form of subsidies on the operational costs for transport providers.

"The subsidy will not be in the form of money disbursed directly to drivers or other operators. It will be about reducing the costs of their operational expenses," he told reporters at the State Palace.

"The policy has been created so that drivers and ticketers do not raise their fares by more than 10 percent because this would spark public protest," he said.

Hatta said the package would include an exemption on import duties for public vehicles and their spare parts. The government would also divert more funds into public transportation departments to cut down on extortion and other illegal fees.

"Fuel and illegal fees account about 40 percent of public transport operators working costs. If we can curb extortion by unscrupulous officials and thugs and make the operation more efficient, the operators will not raise their fees as high," the minister said.

He said central government had also ordered local administrations to reduce fees for vehicle registration procedures, renting terminals and car inspections in a bid to cut the operational costs of operators.

Hatta said the ministry had ordered local administrations to immediately issue an adjustment of fares in locally owned transport services to prevent the protest.

"If local administrations cannot agree on the new fares, they should issue temporary ones instead to prevent uncertainty," he said.

The Jakarta chapter of the Organization of Land Transportation Owners (Organda) had submitted its proposal to Jakarta administration last week to increase fares more than 10 percent, arguing that they had to "take into account other things, like auto parts, lubricant consumption and the salaries of public transportation crew".

Jakarta's City Transportation Council is scheduled to meet Governor Sutiyoso on Monday to discuss on the proposed hike by at least 13 percent.

Such move was different from the government's which had already asked operators of public transportation services not to increase their fees by more than 10 percent. However, many drivers had ignored the plea and the reality for most public transport user was a fare increase of between 20 percent and 35 percent.

The government hoped the package would ease the financial burden on public transportation end users who are not yet eligible for low-income assistance funds from the government.

The government increased fuel prices starting March 1 by an average of 29 percent. The fuel subsidies were slashed to reduce the burden on the state budget, encourage more efficient fuel use and prevent fuel smuggling.

However, the transportation ministry's proposal to exempt import duty could face a stumbling block from the finance ministry.

Minister of Finance Yusuf Anwar said he was still studying the proposal's impact on public revenue.

"The import duties exemption will automatically cause losses to the state. We are still calculating the cost, whether the idea is feasible for both the state and the public," he said.

Bus fares -- Page 8