Govt ready to bite fuel hike bullet: VP
Muninggar Sri Saraswati, The Jakarta Post, Jakarta
The Vice President has said that government was ready to accept the political risks associated with the decision to increase fuel prices, reiterating that budgetary sustainability would come under even greater threat if they were not raised soon.
Vice President Jusuf Kalla said on Saturday that fuel price hikes were necessary to avoid fiscal disaster amid soaring international oil prices.
"We are ready to face the risk of being rejected (by the public). But not everyone opposes the policy," Kalla told reporters after addressing the 2006 Sulawesi Expo in Jakarta.
Several Cabinet members have said that fuel prices will have to be raised early next month, possibly by an average of 50 percent or more, to help bring fuel subsidy spending down to a sustainable level. The exact date for the hike and the percentage increases involved will be decided later by President Susilo Bambang Yudhoyono after consultation with the House of Representatives.
Although an oil-producing country, Indonesia has become a net oil importer due to declining oil production at home. As a result, the country needs to import some of its oil needs for refining into fuel products, a situation that has inflated the cost of covering fuel subsidy spending. Fuel prices at home are among the lowest in Asia as a result of the government subsidies.
Kalla said that the government's financial position was being undermined due to the rising cost of the fuel subsidies.
"If we don't raise domestic fuel prices, the government will have to pay out between Rp 130 trillion (about US$13 billion) and Rp 140 trillion (for fuel subsidies this year). We cannot afford it," Kalla said.
By reducing fuel subsidy spending, the government will have more money to finance infrastructural development around the country, he said.
"If fuel prices are not increased, the entire budget will only be capable of paying for the subsidies and repaying foreign loans. Now, we can choose between developing the country or burning fuel on the streets," Kalla argued.
He said that with given the stark nature of the choices available to the government, many people understood that fuel prices had to be increased.
"There are also many people who agree with the policy. And we are ready to provide compensation (to the poor)," he added, pointing to the plan to provide Rp 100,000 in cash per month to each poor family. The Central Statistics Agency (BPS) has said that about 15.5 million underprivileged families would be eligible to receive the cash payments.
The government has said it will start making the payments early next month.
President Susilo Bambang Yudhoyono has said that fuel prices will be increased after mechanisms to compensate the poor have been put in place, and full compensation had been paid to all those entitled for the previous increase in fuel prices.
Increasing fuel prices in Indonesia is always a politically sensitive move, although the government's decision to increase fuel prices in March last year by an average of 29 percent was not followed by massive protests as occurred in 1998, when fuel price increases contributed to the fall of former authoritarian president Soeharto.