Indonesian Poor to Receive Rp 14 Trillion in Aid Ahead of Fuel Hike

Jakarta Globe, Ezra Sihite, May 13, 2013

A street vendor sells fuel in a plastic containers in Samarinda,

 East Kalimantan on March 24, 2013. (Reuters Photo)

The Indonesian government is poised to distribute up to Rp 14 trillion ($1.4 billion) in aid to the poor ahead of the central government’s planned fuel price hike.

The central government is trying to ween Indonesian motorists off the nation’s costly fuel subsidies — which cost the state some Rp 211.9 trillion in 2012 and heavily favor middle class drivers. President Susilo Bambang Yudhoyono has issued instructions which require the government to simultaneously slash fuel subsidies and increase welfare spending.

This round of payouts will reach some 15.5 million households living on less than $2 a day, Coordinating Minister of Welfare Agung Laksono said. Additional spending in the form of school aid and subsidized rice will be handed out as the fuel subsidy cuts take effect, Agung explained.

The coordinating minister said the government must spend some of the savings on the nation’s poor.

“The potential budget savings [from subsidy cuts] is up to Rp 37 trillion,” he said. “It must be returned to the poor people through compensation programs and also infrastructure development.”

Previous efforts to raise the price of subsidized fuel sparked days of chaotic protests. The plan was scuttled by Golkar Party and Prosperous Justice Party (PKS) factions in the House as protests peaked in Jakarta.

Critics of the plan argue that higher fuel prices will hurt the poor by causing food prices to rise. But the government spends more on energy subsidies than it spends on either education or health care.

The government has floated raising the price of premium subsidized fuel from Rp 4,500 per liter to Rp 6,000. The price hike is expected to take effect next month.