The Indonesian government has confirmed it will raise fuel prices by at least 50 per cent as early as October. As fears subside that widespread social unrest will follow a price rise, concern is now shifting to whether a scheme to compensate the very poor will hit its target.

Karon Snowdon spoke to Dr Ivan Hadar, Executive Director of the private think tank, the International NGO Forum for Indonesian Development and prepared this report.

Snowdeon: Even though President Susilo Bambang Yudhoyono is currently at the UN meeting in New York, he continues to direct traffic at home via daily satellite cabinet meetings. Cutting back this years' projected 14-billion dollar bill for fuel subsidies has become urgent.

But the government wants to bring in compensation payments at the same time for the poor before it raises fuel prices. The problem is it's a bit rushed according to social researcher Dr Ivan Hadar who says a lack of information will render targetting the right groups difficult.

Hadar: It is one of our concerns, planning body for example don't have such information according to the poor people. That's why I'm wondering whether without a clearer concept, without the right methology to achieve target group that a lot of money, about three-thousand-billion rupiah to disseminate to the groups, whether they will be achieved by the right groups. Because you know our bureaucrats here right now is not yet clean and still very vulnerable for corruption.

Snowdeon: The government is making some efforts to avoid the problem of the money being misdirected by making direct payments through the post office, so people go and collect their compensation from the post office. So the government is aware of that, would you give them some credit for trying to implement a scheme that will work better than it has in the past?

Hadar: You know it's not just the willingness, you have to look at the existing bureaucracy and this is for me still quite vulnerable for misleading of the money.

Snowdeon: The details of the scheme as far as they're known involves a monthly payment of 100,000 rupiah – about ten dollars to the very poor – those earning 175,000 rupiah, or less than 20 US dollars a month. Perhaps as many as 15 million people. It's a great deal of money in total for the government to come up with – but much less costly than the massive fuel subsidies it now pays for.

That the government is prepared to make such a politically sensitive policy change recognises in part what most people already know – the biggest winners from the subsidies are those wealthy enough to drive cars, and those involved in the black market and in smuggling cheap oil.

But no-one likes higher prices and they feed through to some extent into public transport and food costs. The biggest impact on the poor will be the higher cost of cooking kerosene from its current seven cents a litre.

Ivan Hadar, the Executive Director of the International NGO Forum for Indonesian Development, says his first concern is the compensation is simply not enough. And he'd prefer a different system with the funds distributed at the district level rather than to individuals.

Hadar: Even if this is achieved the right family or person it's not much, 100-thousand rupiah for a month is nothing.

Snowdeon: Do you think generally that the public now accepts that the fuel subsidy scheme is costing the government a fortune and will have to be phased out and that fuel costs are going to rise?

Hadar: I think yeah, nowadays the majority of the people accept that, but how to provide subsidy and to reach the real people who need it, it's still a big question.

Snowdeon: Meanwhile extra efforts are being made to end the blackmarket consequence of subidies – and that's the theft and smuggling of fuel and oil. One report suggests this is costing the government more than 800-million dollars a year.

A large number of arrests have been made in recent weeks of officials of the state oil company Pertamina and a long needed management shakeout is expected.