Government to maintain fuel subsidy scheme

JAKARTA (JP): The government will maintain its latest fuel subsidy scheme which will channel direct cash aid to poor families once it raises fuel prices in October, this year.

Deputy on Natural Resource of the National Development Planning Board (Bappenas) Herman Haeruman said that the government would stick to the plan of using post offices throughout Indonesia to channel the cash aid.

"Post offices remain a good distribution channel to reach even the remotest areas," Herman, who is also head of the government's fuel subsidy team, said last week.

The government initially planned to raise fuel prices by an average 12 percent on April 1, 2000, in a bid to cut subsidy spending to about Rp 18 trillion (US$2 billion).

The fuel subsidy scheme is aimed at protecting poor families and public transportation passengers from the increase in fuel prices.

The first scheme involved the distribution of coupons to poor families and public transportation owners to help them buy fuel at prices before the subsidy cut.

But critics said the scheme was vulnerable to abuse, and in response the government decided in late March to channel cash aid directly through post offices instead.

However, massive demonstrations against the price hikes led President Abdurrahman Wahid to postpone the plan on the eve of April 1.

Herman said that the government would establish a team to supervise the distribution at post offices.

"We will safeguard the funds at each distribution level," he said.

He added that transparency through proper documentation would also ensure that the funds would be distributed to the rightful families.

"It's going to be open to anybody who is and is not eligible for the cash aid," he said, adding that some 17.4 million poor families would receive the funds.

This way, he said, the scheme could also rely on feedback from the receivers to identify leakages in the distribution chain.

He said that with the revised subsidy scheme, the government would not only compensate for the hike in fuel prices, but also the increase of the price of goods affected by the cut in fuel subsidies.

"We will include in our subsidy scheme the impact of higher fuel prices on other commodities," Herman,

He said the impact of the higher fuel prices would be based on the estimated inflation rate as a result of the fuel subsidy cut in October.

Under the revised subsidy scheme, Herman said, each poor family would receive an annual subsidiy of Rp 50,000 to compensate for the fuel price increase.

The previous scheme offered Rp 10,000 for nine months during the last fiscal year.

The government plans to raise in October the price of Premium gasoline to Rp 1,150 from Rp 1,000 per liter, automotive diesel fuel to Rp 600 from Rp 550 per liter, kerosene to Rp 350 from Rp 280 and bunker fuel to Rp 400 from Rp 350 per liter.

Under the previous scheme, the government would have spent some Rp 495.8 billion to compensate for the fuel subsidy cut during the April to December fiscal year.

Of that amount, poor families would have received a total of Rp 164.8 billion, with another Rp 331 billion subsidizing public transportation owners.

But the revised subsidy scheme would exclude public transportation owners, Herman explained.

He said that the government would start promoting the new subsidy scheme this month.

"We will ask for input from the public regarding the scheme," he added.

But Minister of Finance Bambang Sudibyo said that the government would seek to raise fuel prices again on April 1, 2001.

Meanwhile, legislator Irwan Prayitno suggested that the government keep fuel prices at the present level, and instead turn the price increase into taxes on car owners and companies.

"The people are not ready yet to accept higher fuel prices," Irwan, who is head of the House of Representatives Commission VIII, which oversees mines and energy, said.

He said thus far he has seen little efforts from the government to promote the importance of a fuel subsidy cut.

The government last raised fuel prices in 1998, resulting in riots that led to the resignation of then president Soeharto in May of that year.(bkm)