Minggu, 25 Maret 2012

Indonesia Government Committed to Controversial Fuel Price Increases

Arientha Primanita | March 22, 2012
Indonesian soldiers stand guard outside the Presidential Palace during a protest against the government’s plan to raise fuel prices in Jakarta, Indonesia on Wednesday. (JG Photo/ Yudhi Sukma Wijaya) 

The government on Wednesday expressed confidence it would be able to proceed with its plan to increase the price of subsidized fuel next month despite strong opposition from political parties and labor unions. 

Finance Minister Agus Martowardojo told reporters at the Presidential Palace he was “optimistic” the government would be able to apply the planned 33 percent increase in the price of subsidized fuel to Rp 6,000 per liter. “We have to protect the people,” he said. 

As he spoke, thousands of union workers were marching toward the palace from the Hotel Indonesia roundabout two kilometers to the south to protest against the subsidy cut. 

There were also demonstrations in cities across the country, with some turning violent. 

Agus argued that fuel subsidies disproportionately benefit the rich, who were more likely to drive private cars that consumed more fuel. Poorer people, on the other hand, use less fuel because they were restricted to driving motorcycles or taking public transportation, he said. 

Sutan Bhatoegana, a Democratic Party official, said the party supported the plan “for the sake of economic stability.” 

He claimed that all parties in the ruling coalition except the Prosperous Justice Party (PKS) were in favor of the plan. 

Agus’s optimism came despite a deadlock at the House of Representatives, where lawmakers and the ruling administration failed late on Tuesday to reach an agreement on fuel and electricity subsidy costs for the revised 2012 budget. Without one, the plan might not take effect on April 1 as planned. 

The ruling administration and House Commission VII, which oversees energy, could only agree to maintain last year’s 40 million liter quota for the country’s subsidized fuel consumption. 

Bambang Brodjonegoro, acting head of fiscal policy at the Finance Ministry, said that if fuel and electricity prices did not increase, the revised 2012 state budget would need a substantial amount of extra money to cover those costs. 

Fuel subsidy spending, he said, would soar to Rp 179 trillion ($19.5 billion) from the Rp 124 trillion set in the original state budget. 

If the price of subsidized fuel increased by Rp 1,500 as the government plans, the subsidy would only cost Rp 137 trillion to maintain. 

The opposition Indonesian Democratic Party of Struggle (PDI-P) has come out against the proposal. 

The Golkar Party, the second-largest party in the legislature and a member of the ruling coalition, supports the plan, demanding that savings be used for infrastructure, education and health. 

Golkar opposes tempering the subsidy cut with temporary direct cash aid for the poor, which would help cushion the impact of the price increase on them.

The PKS has called on the government to find a “wiser” solution to lessen the strain of the subsidy on the state budget. 

Milan Zavadjil, senior Indonesia representative for the International Monetary Fund, which helped arrange a billion-dollar bailout package for the country during the Asian financial crisis in 1997, said that in the short run “the subsidized fuel oil price hike will have a negative impact, but this decision is very good for the economy in the medium and long terms,” he was quoted as saying by Antara news agency. 

However, Zavadjil also asked the government to watch out for a second round effect on inflation, in which the prices of other goods and services rise. 

Additional reporting by ID/Ezra Sihite and Kunradus Aliandu

My Opinion :

More recently, the government of Indonesia will raise fuel prices by reducing fuel subsidies because of rising world oil prices. Calculations of the fuel subsidy was still being debated, there is one version of thegovernment's version of the opposition. Which one can be trusted? To this day I still believe the government version, because here the government is the direct perpetrator. Not that the opposition is wrong, but it should make a counter with a check/cross check the data with the existinggovernment in the field. The Government should also actively provideresponse to cross check it. With a loop like that, you will get transparency,and increase people's trust.
The government was set to raise the price of gasoline from around 50 cents to 65 cents per liter on Sunday. It says it has no choice but to cut budget-busting fuel subsidies, which have for years enabled motorists to fill up for roughly $2 per gallon.
The 550-seat house voted early Saturday to allow a price hike only if the average price of Indonesian crude in six months soars 15 percent above $105 per barrel, to $120.75 per barrel. The average price of Indonesian crude is now $116.49 per barrel.

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