Don't hype fuel price hikes: Susilo

Rendi A. Witular and Fabiola Desy Unidjaja, The Jakarta Post/Jakarta

Fearing that the government's plan to raise fuel prices will become a political commodity, President Susilo Bambang Yudhoyono urged politicians not to take advantage of the price hike by provoking the public and creating social instability.

Speaking during the opening of the Indonesian Capital Market Seminar and Expo on Friday, the President called on politicians and protesters to stage peaceful rallies if they wanted to protest the fuel hike.

"Protests from the public, including politicians, on the fuel price hike plan are understandable. I'll allow that. But the protests must not contain any political motives, which may disturb our security and stability," he said, without referring to specific politicians or political parties.

The government is planning to reduce the fuel subsidy, which will mean a raise in fuel prices by an average of 29 percent. The plan, however, has sparked sharp criticism from the House of Representatives.

After intense lobbying by a number of ministers this week, the House's Budget Commission, as well as Commission VII for energy and Commission XI for financial affairs, have not yet approved the plan.

Susilo hinted that the fuel price hike would likely go into effect in the near future without having to wait for House approval.

Many political pundits believe that such a move would spark public unrest, which would affect Susilo's popularity, particularly after it declined following his perceived slow progress in improving the country's economy during his three months in power.

The president emphasized that the country's economy was on the verge of collapse under the weight of the fuel subsidy, which has turned out to be unproductive and unjust.

"Many have warned me that increasing fuel prices will lower my popularity. But I told them that I am willing to prevent our economy from collapsing at the expense of my popularity. A true leader is not afraid to make unpopular choices when it comes to policy," said Susilo.

"The current fuel subsidy is considered unjust for the lower- income people. I assure you there will be no price hike for fuel consumed by that segment."

Susilo also told the capital market players that the price hikes would not disturb the current stable economic condition since the low-income assistance funds taken from fuel subsidy will be allocated for development and welfare.

Vice President Jusuf Kalla said earlier that without the hike, the budget expenditure for the fuel subsidy alone would skyrocket to over Rp 100 trillion (US$10.8 billion) this year, leaving almost no room for the government to allocate funds for infrastructure development.

Sufficient infrastructure is badly needed to support the economy and employ people so it can grow by more than 6.5 percent on average for the next five years.

Meanwhile, State Minister of National Development Planning Sri Mulyani Indrawati warned that the upcoming fuel price hike would drive the inflation rate higher by 1.5 percent.

However, she said, the government remained optimistic that it would be able to control the inflation target this year at around 7 percent.

"The fuel price hike will trigger an increase of prices of other goods and commodities. But we will try to keep downward pressure on inflation to maintain it at a reasonable level," she said.

Part of the efforts to keep inflation down include conducting market intervention to ensure availability of staple food and other goods, as well as preventing speculation by suppliers.