House decides to OK extra fuel subsidy allocation
House decides to OK extra fuel subsidy allocation
Dadan Wijaksana, The Jakarta Post, Jakarta
The House of Representatives endorsed a revision to the 2004
state budget law on Tuesday despite the fierce resistance of
lawmakers from the Reform faction, who opposed the huge fuel
subsidy.
Under the revised law, the fuel subsidy is set at Rp 59.2
trillion (US$6.43 billion), plus Rp 3.6 trillion in extra funds
should the next government decline to raise fuel prices latter
this year as recommended by the House.
In total, the state budget allocates some Rp 63 trillion to
cover the fuel subsidy for 2004 amid soaring oil prices, which
have forced the government to increase the average oil price
assumption in the budget to $36 per barrel from $22 per barrel in
the original budget. Oil prices have now surged to over $50 per
barrel.
The massive fuel subsidy allocation -- almost three times the
total foreign loans the government has borrowed during the year,
which stand at Rp 21.7 trillion -- upset some legislators,
notably from the Reform faction.
"An increase of more than 300 percent in the fuel subsidy does
not make any sense," Nurdiati Akma, the faction's spokeswoman,
said while reading a statement from the faction.
Not only has the subsidy burdened the already cash-scrapped
budget, but it has also been the source of injustice among the
public, with the subsidy being largely enjoyed by car owners, not
the poor, she said.
In addition, the current fuel policy encourages the smuggling
of fuel, Nurdiati said. "Those who benefit from a fuel policy
like this are those who smuggle the subsidized fuel products to
overseas."
"Taking all of this into account, the Reform faction expresses
its objection to the plan, and therefore rejects the revision to
the 2004 state budget bill," she said to applause from
supporters.
A.M. Fatwa, who presided over the meeting, called for a brief
recess after Nurdiati's speech to allow for lobbying.
After some 15 minutes of lobbying, legislators from the Reform
faction agreed to the passage of the bill into law, only
submitting a note of objection.
The next government will be sworn in on Oct. 5, with the new
House members to be sworn in on Oct. 20. Resolving the fuel
subsidy issue will be one of the most difficult tasks faced by
Susilo Bambang Yudhoyono, who is likely to become the country's
next president, as raising fuel prices would be a politically
sensitive measure, while maintaining fuel prices at a time of
surging oil prices could lead to fiscal disaster. The fact that
Susilo's political party, the Democratic Party, holds a small
number of seats in the House will likely make this job even
tougher.
Meanwhile, the remaining eight factions at the meeting,
although most expressed some objections to the massive fuel
subsidy, approved the bill.