Commission OKs proposed fuel price hike
Urip Hudiono, The Jakarta Post, Jakarta
Providing the government with much-needed support over its plan to increase fuel prices, the House of Representatives Budget Commission has approved a fuel subsidy allocation in such a way that makes the increase mandatory.
At a hearing on the second and final revision of the 2005 state budget on Tuesday, the commission decided to chose the second option -- which earmarks the fuel subsidy at Rp 89.2 trillion (US$8.75 billion) -- over the first one, which sets the figure at Rp 113.7 trillion.
The two options were the remaining alternatives on the table after weeks of intensive debate.
"The Budget Commission agreed on the second option, which consequently gives room to the government to increase fuel prices," commission head Emir Moeis told the forum when reading out the conclusion of the hearing.
With the government having disbursed Rp 78 trillion to subsidize fuel as of August, it will have no choice but to raise fuel prices to keep the cost of the fuel subsidy in check so that it does not exceed the full-year target of Rp 89.2 trillion.
The commission's decision must be approved by a House plenary meeting, scheduled for Sept. 27.
It will be difficult for legislators to reject the commission's proposal, as under prevailing laws, a rejection would mean reverting back to the figure earmarked in the first revision of the 2005 state budget, which was Rp 76.3 trillion -- even lower than the money the government had disbursed as of August to subsidize fuel.
Minister of Finance Yusuf Anwar declined to specify the rate of the increase, saying: "Calculations are underway, we'll see how they turn out.
"The government is happy that the Budget Commission preferred the second option as we believe this will lend more credibility to the government, as well as to the House. It shows that we are capable of straightening our fiscal fundamentals out."
Previously, State Minister of National Development Planning Sri Mulyani Indrawati said that the fuel price increase would be at least 50 percent.
The commission also approved revisions to other key assumptions.
The country's economic growth remained set at 6 percent, betting on improving investment and export growth, which are expected to sustain its 13.6 percent and 10.2 percent growth, respectively, during the first semester, until the rest of the year.
Inflation was set at 8.6 percent, higher than the government's 8 percent proposal, in part on estimated further inflationary pressure from high oil prices and a weak rupiah.
The rupiah exchange rate was earmarked at Rp 9,800 per dollar, higher than the government's Rp 9,500 proposal, until the year's end.
The Commission also approved state revenues amounting to Rp 540 trillion or 20.4 percent of the GDP, higher than proposed Rp 516.2 trillion.
The revenues include from tax Rp 352 trillion, from non-tax Rp 180.7 trillion.