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Political support for Indonesian fuel hike fading quickly

Source
Jakarta Globe - March 24, 2012

Markus Junianto Sihaloho & Ezra Sihite – With just a week to go until April 1, the chance of the government's proposed fuel price hike being approved by the legislature is slimmer than ever, with political support within the ruling coalition weakening by the day.

On Thursday, the Prosperous Justice Party (PKS) informed the president of its decision to reject the proposal to reduce subsidy spending by increasing the price of subsidized fuel from Rp 4,500 to Rp 6,000 (49 cents to 65 cents), offering alternatives instead.

Sutan Bathoegana, head of the Democratic Partys' central leadership board, said that while differences were not forbidden in the coalition, once something had been decided, all member parties were obligated to support it. "We should put the country's interest ahead of our own," he said.

On Friday, another coalition member, the United Development Party (PPP), said it was not sure whether to support the plan. "We are now doing simulations [to see what would happen] if the fuel price is increased, not increased or if the hike is postponed," PPP secretary general Romahurmuzy said.

The party's first plan is for the government to postpone the plan and aggressively develop the infrastructure to support a shift to compressed natural gas during the next two years. The second option is to support the fuel price hike proposal, but not the plan for an accompanying cash handout program (BLT) for the poor.

The third approach is to accept the fuel price proposal on the condition that the increase only ranges between Rp 500 and Rp 1,000 per liter and the government makes budget cuts in other areas. "The party will issue its official stance on March 28," Romahurmuzy said.

If the PPP takes the same stance as the PKS, it would mean five of the nine parties in the House of Representatives were against the proposal.

The opposition Indonesian Democratic Party of Struggle (PDI-P), the third-largest party in the House, along with opposition parties the Great Indonesia Movement Party (Gerindra) and the People's Conscience Party (Hanura) have already come out against the proposal.

The Golkar Party, the second-largest in the House and a member of the ruling coalition, supports the plan but has said it wants the subsidy savings be used for infrastructure, education and health instead of BLT, which analysts say would only politically benefit the ruling Democrats.

Arya Fernandez, an analyst from the Charta Politika consultancy, said the price hike could only be implemented if the president successfully negotiated it with coalition members. "The first and foremost challenge against the plan comes from inside the coalition. The chances are getting slimmer," he said.

Arya said that Golkar held the trump card in whether the government could raise the subsidized fuel prices or not. "If Golkar joins the PKS, then the Democrats should forget the plan altogether," he said.

The Democrats, meanwhile, said they would continue to push for the plan. Senior lawmaker Ramadhan Pohan argued that the increase was a necessary step to save the state budget.

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