Fuel prices hike won't hurt the poor, says government

Fuel prices hike won't hurt the poor, says government

The Jakarta Post, Jakarta

Amid mounting concern over the negative impact of its fuel price
hike policy, the government said the poor should not be affected
as it had allocated to them sufficient compensation funds of Rp
2.85 trillion (US$274 million) this year.

Minister of Information Syamsul Muarif said on Wednesday the
funds would be disbursed to some 55 million poor people in the
country.

Speaking at a media conference held to disseminate more
information about the fuel price hike policy, he said that each
poor family, with an average of five members, would receive
around Rp 350,000 worth of assistance.

The money would be more than sufficient to offset the increase
in the expenditure of poor families, estimated at about Rp
170,000 per family per year, he said.

The conference was also attended by Minister of Energy and
Mineral Resources Purnomo Yusgiantoro and Minister of
Cooperatives Alimarwan Hanan.

Syamsul said the higher expenditure of poor families was
caused by an increase in fuel prices, a 10 percent to 20 percent
hike in transportation costs and inflation.

According to government data, poor people in the country total
around 40 million, with monthly expenditure of Rp 72,909 to Rp
95,929.

The government raised fuel prices by an average of 22 percent
starting from Jan. 17. The price will change again in March,
thereafter to be set monthly based on fuel prices in neighboring
Singapore.

The progressive fuel price hikes are part of the government's
attempt to reduce fuel subsidies in order to ease the burden on
the state budget.

It could also help minimize the widespread smuggling of
heavily subsidized fuel products out of the country.

But the raising of fuel prices is politically sensitive in the
country, particularly as the public has endured years of economic
hardship.

Even before the government raised fuel prices, the price of
some basic goods, such as rice and kerosene, had soared due to
massive hoarding, although prices have now started to go down
again.

The fuel compensation program will therefore play an important
role in minimizing the negative impact on poor people.

However, similar compensation programs have been a target of
corruption in the past.

Syamsul said the government would do its best to channel the
funds to the targeted people and minimize fund misuse.

The government would carry out an audit of the funds to ensure
transparency in their allocation, he said, adding that it would
also audit the compensation funds disbursed during the past two
years.

Of the total Rp 2.85 trillion in compensation funds, the
government will allocate about Rp 1.28 trillion to the education
program, Rp 570 billion to health and social support, and Rp 500
billion to food support.

The government allocated Rp 800 billion and Rp 1.8 trillion to
the compensation fund in 2000 and 2001 respectively.