Sat, 01 Apr 2000

Govt backs down on fuel price hike

JAKARTA (JP): The government bowed on Friday to widespread public opposition to a planned fuel price increase, indefinitely postponing the measure at the eleventh hour as the capital braced for mass demonstrations.

President Abdurrahman Wahid, in announcing the policy change at a special news conference, said the government would implement increases in transportation and electricity rates and give an across-the-board pay raise of 30 percent to civil servants, beginning on Saturday.

It also held firm to its controversial decision for hefty increases in structural allowances of the four top ranks of government officials, despite strong opposition from the Civil Servants Corps and many other groups.

"If we are serious about building a clean government, we have to improve their salaries and fringe benefits. This will help minimize corruption," the President said.

Abdurrahman said the 500 percent to 2,000 percent increase in the perquisites for high-ranking officials would provide impetus in the fight to eradicate corruption, collusion and nepotism.

"We will not let low-ranking officials suffer. The government will do its best to improve their take-home pay as soon as the country's economic condition allows. Next year will be the turn of low-ranking officials to get a high increase in their salaries."

He said the government postponed the planned fuel-price hike because circumstances in the country were not conducive.

"We will increase fuel prices when we are ready."

A deputy at the National Development Planning Board (Bappenas), Herman Haeruman, said separately that fuel subsidies would increase Rp 3 trillion to Rp 25.46 trillion if the fuel- price hike was postponed in the April-December period of the 2000 state budget.

"The delay also will require the government to amend the state budget with House approval," Haeruman said.

The government and the House of Representatives agreed in February on an average 12 percent increase in fuel oil prices that would cut subsidy spending to a total of Rp 22.46 trillion (US$3 billion).

" I can fully understand the people's frustration about the planned rise in fuel-price rises while the state oil and gas company Pertamina is still losing a great deal of money through inefficiency," Abdurrahman said.

He pledged to clean up Pertamina.

"The public demand for an efficient Pertamina is natural. We hope that the new management will be able to increase the company's efficiency to the level set by the government."

He said that while the government was able to meet people's aspirations about fuel prices, it had no choice but to go ahead with the increase in electricity rates, averaging 30 percent, and transportation fares.

The government has pledged to protect low-income consumers by not raising their electricity rates.

The President argued he could not postpone raising transportation fares because they were frozen since 1996, while the prices of spare parts and operational costs rose sharply in tandem with the rupiah's depreciation.

"Our public transportation industry will collapse if transportation fares are not raised," he said.

Public opposition to the increases continued early on Friday, with hundreds of university students taking to the streets in Makassar, South Sulawesi.

Minister of Communications Agum Gumelar said on Friday the increase in public transportation fares would need approval from the House.

"As the House is now in recess, a plan to raise transportation fares can be deliberated with the House only in early May," Agum said.

The Ministry of Communications recently proposed an increase of between 30 percent and 70 percent, although industry organizations demanded a hike of from 300 percent to 400 percent.

Agum said the sharp depreciation of the rupiah since 1997 inflated the operating costs of public transportation companies, but fares had remained constant since 1996.

"Since 1997, 40 bus companies have gone bankrupt due to steady losses caused by much higher import costs of spare parts, "Agum said.

In Yogyakarta, economist Tony Prasetyantono said the delay would not damage the government's credibility, which was a concern of Bappenas and economist Emil Salim.

"There is nothing to worry about from the impact of the postponement," he told The Jakarta Post on Friday.

The Gadjah Mada University lecturer added that the delay would also assuage public concerns about possible abuse of the cash subsidies, which were originally to be given to poor families to protect them from the brunt of higher fuel prices.

However, he said subsidies for public bus companies also would be prone to malfeasance and would not ensure low transportation costs for the public. (prb/27/sur/44/vin)