Government to maintain fuel subsidy scheme

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)