Anita Rachman & Dion Bisara – Amid criticism that reducing the fuel subsidy would hurt the poor, Indonesia said on Thursday that a Rp 150,000 ($16.50) monthly cash stipend would be handed out in the first nine months to help cushion the impact of the anticipated price hike.
Coordinating Minister for People's Welfare Agung Laksono said only poor families would qualify for the temporary direct aid package (BLSM). The aid would begin in April, the month when changes to subsidies are expected to be made.
The minister said about 30 percent of low-income families would receive the assistance, but gave no further details. "These people will [show their vouchers at the local post office] and swap them for aid funds," Agung said after attending a cabinet meeting.
The latest data from the Central Statistics Agency (BPS) shows there are 29.89 million Indonesian families living under the poverty line. Such families are defined as those with monthly spending of Rp 243,729 or less per capita.
Under a similar cash assistance scheme in 2008, the government gave monthly assistance of Rp 100,000 to 17.5 million families. Agung said the government would provide other aid as well, including rice and subsidies for school fees and rural transportation.
Social Affairs Minister Salim Segaf Al Jufri said on Tuesday that the government would allocate Rp 30 trillion to Rp 40 trillion this year to help low-income families deal with the initial impact of the fuel price hike.
Salim said the funds would come from savings and increased efficiency in all government ministries and institutions. The Rp 30 trillion to Rp 40 trillion would likely be higher than anticipated savings from reducing the subsidy spending this year, or at least be equal to it.
The government's first proposed option to curb subsidy spending is to increase the subsidized fuel price by 33 percent to Rp 6,000 a liter from Rp 4,500 a litter. This would save the government Rp 31.6 trillion in subsidy spending, which is set at Rp 124 trillion this year, according to research by Investor Daily, a sister publication of the Jakarta Globe.
The second option would be to set a fixed subsidy of Rp 2,000 per liter of subsidized fuel. This would save about Rp 25.8 trillion.
Mahendra Siregar, the deputy finance minister, said on Tuesday that the proposed plan of raising subsidized fuel prices would help the government save Rp 22 trillion. Last year, the fuel subsidy cost Rp 165.2 trillion.
Purbaya Yudhi Sadewa, chief economist at the Danareksa Research Institute, said that while the government might end up spending more this year because of the stipends, in the long term reducing the subsidy would be beneficial because it would mitigate the budget's vulnerability to global oil price fluctuations.
It would also make it easier for the state to spend more money on things like infrastructure, currently viewed as a pressing need.