Jakarta – The Regional Representatives Council (DPD) has added pressure on the government to reconsider its plan to raise fuel prices, saying the policy will severely impact on the country's economy.
In a letter sent to President Susilo Bambang Yudhoyono, DPD Speaker Ginandjar Kartasasmita said the fuel price hikes would save the state budget, but not the whole economy while people's purchasing power and industry competitiveness remained weak.
"The economic crisis people are facing is concerned not only with energy, but also food. The two dimensions of the crisis are pushing each other and will increase the economic burden on people," the letter reads.
Ginandjar said the letter, dated May 15, summed up the DPD plenary meeting on Wednesday, in which councillors unanimously opposed the planned fuel price hikes.
He said the 1997/1998 Asian financial crisis showed that removing subsidies needs to be backed by a strong economy to withstand the economic doldrums.
"Given the vulnerable economic position of the people, there is high risk in taking measures like cutting subsidies, which is the main pillar of our social safety net," Ginandjar, who is a former chief economics minister, said.
The DPD argued the fuel price rise should be the last resort after all other measures to save the budget had been exhausted. To cope with the budget deficit, the government could ask to reschedule foreign loan payments and reduce interest payments of the Bank Indonesia Liquidity Support (BLBI) recapitalization fund and arrange debt swaps and windfall profit tax imposed on companies that benefit from the soaring oil price.
"The tax is strategic as the windfall profit that goes to companies is not a result of their hard work," Ginandjar said, adding that the firms included those in oil, gas, mining and oil palm sectors. Budget and energy efficiency is another option to replace the fuel price policy.
The government plans to raise fuel prices to cap fuel subsidies and protect the state budget. To mitigate the increase, the government has allocated Rp 14. 1 trillion in direct cash assistance for poor families. There were 19.1 million lower income households receiving assistance in 2005.
The government has also earmarked Rp 13.2 trillion in credits to 4,000 districts across the country, and extended Rp 5.3 trillion in credits to around 400,000 micro and small enterprises.
A number of regents and regional legislatures have voiced opposition to the direct cash assistance, for fear that the scheme would spark conflict. Malang legislature member Taufik Bambang said Saturday the scheme would cause "social envy" as it was using the old data to identify recipients.