JP/12/Budget

House factions support govt plan to cut fuel subsidy

JAKARTA (JP): Major factions at the House of Representatives supported the government's plan to further reduce the fuel subsidy next year, saying it would help ease pressure on the 2002 state budget and reduce the risk of smuggling fuel abroad.

However, they demanded the government come up with an effective compensation program to help protect the poor from the impact of the fuel price increase, noting that in past cases most of the money had not reached desired targets.

The House started on Wednesday the deliberation process of the 2002 state budget draft at a plenary session, which was attended by Ministry of Finance Boediono.

Under the draft unveiled last week by President Megawati Soekarnoputri, the government planned to continue to cut the fuel subsidy to Rp 32.29 trillion (about US$3.5 billion) or 1.9 percent of the Gross Domestic Product (GDP) next year from Rp 53.8 trillion this year.

As a consequence, the government may have to raise fuel prices by an average of 30 percent, possibly starting next year.

The fuel subsidy has been a politically sensitive issue in the country. The previous administration of former president Abdurrahman Wahid went through a tough time convincing legislators to approve the fuel subsidy reduction program.

The state budget draft will still have to be debated by the House's special budget committee.

The government is determined to completely eliminate the fuel subsidy in 2004.

Poltak Sitorus, a legislator from the Indonesian Democratic Party of Struggle (PDI Perjuangan) faction, said, "With the termination of the fuel subsidy in 2004, the faction believes that the faster it is done the better as long as the negative aspects can be handled properly."

He explained that the fuel increase would encourage energy saving, increase efficiency in resource allocation and prevent smuggling.

However, the government should also be able to prove that compensation was given to those in need and that it should carefully review the planning, realization and control of the compensation scheme, Poltak said, reading the faction's general overview of the 2002 state budget draft.

Simon Patrice Morin of the Golkar faction concurred with the views of PDI Perjuangan, saying that reducing the fuel subsidy was understandable to make room for a larger budget on development.

However, the faction proposed that by increasing fuel prices, the government should carefully calculate a more rational fuel price, including for imported fuel, he said.

The government should give a detailed outline on how ready it is in monitoring the distribution of fuel to reduce smuggling, monitoring the selling price and domestic consumption rate to avoid price manipulation in isolated areas, and to prevent overproduction or importing too much fuel, Simon said.

"We also want the government to explain about its zero fuel subsidy planned for 2004, and the success of its compensation scheme and social welfare program aimed at the poor," he added.

Simon said that the Golkar faction suggested the government design a comprehensive program to improve welfare, education and public health to be financed by the cut fuel subsidy.

A legislator from the United Development Party (PPP) faction, Sofyan Usman, said the subsidy cut should be followed by steps in ensuring efficiency in production and distribution, and the government's serious attempt to curb collusion, corruption and nepotistic practices in state-owned oil and gas company Pertamina.

Elsewhere, House factions also questioned the government's 2002 deficit estimate of Rp 43 trillion or 2.5 percent of GDP, arguing that it was too optimistic.

Ida Fauziah of the National Awakening Party (PKB) faction said to reach a deficit of 2.5 percent of GDP, Indonesia's economy must grow by more than 10 percent, which is impossible given the current circumstances.(tnt)