Poor will get fuel subsidy funds

JAKARTA (JP): The government said on Tuesday it would allocate Rp 800 billion (US$96 million) of the additional revenues to be generated by the upcoming October hike in fuel prices in the form of cash aid for the poor, seed capital for small businesses and infrastructure development in rural areas.

The government has selected three mechanisms for channeling the funds, namely direct cash transfers to the poor to insulate them from the impact of the fuel price rise, credit schemes for small businesses, and investment in infrastructure development.

Coordinating Minister for the Economy Rizal Ramli told a press briefing that a team had been formed to manage the distribution of the funds.

He said that the team, which is under his chairmanship, comprised, among others, Minister of Energy and Mineral Resources Purnomo Yusgiantoro; Minister of Settlement and Regional Infrastructure Erna Witular; and State Minister for Cooperatives and Small/Medium Enterprises Zarkasih Noer.

"The team is also responsible for disseminating information on the fuel price increase so as to sway public opinion in favor of this unpopular measure," Rizal said.

The government recently announced it would go ahead with its plan, already delayed since April, to hike fuel prices by an average of 12 percent as from October. The exact date has yet to be set.

With the increase, the government expects to save Rp 800 billion in subsidies during the remaining three months of this year's state budget, which expires in December.

Purnomo said the government had yet to determine how much of the Rp 800 billion would be channeled through each of the mechanisms.

He explained that the team would first monitor the public's response to the subsidy mechanisms before deciding on fund allocation.

"So the task ahead is to decide how will we go about distributing the Rp 800 billion to the public," Purnomo said.

Deputy Head in charge of Natural Resources at the National Development Planning Board (Bappenas) Herman Haeruman said that the mechanisms allowed for direct public participation.

"Instead of the central government controlling fund allocations, we'll let the people decide what they need," he said.

He added that the government would use existing financing mechanisms to channel the funds.

"These are reliable programs that we have been using for the past two to three years," he said of the three mechanisms.

Herman, who is responsible for the direct cash aid mechanism, said that locals in each village would themselves decide on the use of their share of the funds.

The local community will determine by itself which families will be eligible for the subsidy, according to information contained in a leaflet on the scheme.

Under the previous subsidy scheme, the government had identified some 17.4 million underprivileged families whom it planned to insulate from the effects of the fuel price hike through direct cash assistance.

While the previous scheme was to use post offices across the country to distribute the funds, the new scheme will use banks.

So far the government has only selected Bank Rakyat Indonesia (BRI), which has a nation-wide branch network, as a distributor of the funds.

The second mechanism, which concerns small businesses, will be managed by Minister Zarkasih Noer.

Zarkasih said the money, known as revolving funds, would be extended in loan form to small businesses in a bid to strengthen the economic recovery.

He said the loans would be subject to commercial interest rates, but small businesses could receive discounts if they repaid the loans upon maturity.

According to him, most small businesses only needed minor credits ranging from Rp 1 million to Rp 5 million.

"We will distribute small amounts of funds to many businesses," he explained.

Zarkasih said the government would transfer the funds to rural financing institutions who would then relay the money to small businesses.

Erna, who is in charge of infrastructure development, said the fuel subsidy funds would also be used to develop infrastructure in villages and urban slums which would be selected by the local communities themselves. (bkm)