Jakarta – Indonesia's Parliament wants stiffer cuts in petrol subsidies and price hikes more drastic than the 30 per cent jump already slated by the government – a development that could inject additional fuel to the escalated political tension in Jakarta and spark further mass demonstrations later this month.
Parliament's budget committee, which faces the Herculean task of controlling a gaping budget deficit estimated to reach 85 trillion rupiah (S$15.3 billion), decided late on Wednesday to allocate only 41.3 trillion rupiah for petrol subsidies this year.
Committee chief Benny Pasaribu of PDI-P said: "This has to be accepted by the people. We can't afford more subsidies, especially if subsidies result in petrol being smuggled out of the country. A subsidy of 60.4 trillion rupiah is not going to help stabilise the budget," he said.
He was referring to the subsidy figure pitched by the Finance Ministry's latest budget revision, which has already presumed a 30 per cent price increase to motorists to be implemented on June 15.
Clashing fuel-consumption assumptions, with Parliament calculating a consumption of 51 million kl, or five million kl less than the government's figures, also contributed to the wide gap between the two sides. The government is scrambling to close up the budget deficit.
In addition to the planned petrol price hikes, Jakarta is also considering increasing rates for electricity by 17.5 per cent and telephone by 21.7 per cent.
Both Parliament and the administration, however, appeared committed to slashing subsidies – one of the conditions previously set by the International Monetary Fund (IMF) for its continued support for, and loans to, Jakarta. Indonesian Vice-President Megawati Sukarnoputri has even planned a major speech for June 14 to urge acceptance and tolerance of the new prices.
Yet top Economics Minister Rizal Ramli joined several analysts yesterday in warning that implementing even a 30 per cent fuel hike could serve as the spark that blows the top off the Indonesian powder keg. Huge demonstrations following petrol price hikes imposed in 1998 helped force the resignation of then president Suharto after 32 years in power. Mr Rizal said: "Within the current situation, this is surely not wise. The price hikes will lead to an even hotter situation."
Political analyst Kusnanto Angorro of the Centre for Strategic International Studies agreed: "This has serious political impacts. Higher petrol prices lead to higher prices for staple goods. The burden on the poor will be tremendous." "It's bad timing given the political situation. Delaying the hikes would be better for the government," the analyst said.
Economist Sri Adiningsih of Gadjah Mada University argued for the necessity of the price hikes, saying that only subsidy cuts would alleviate pressures on the state budget and repair Jakarta's strained relationships with the IMF and other aid agencies. But she also cautioned: "We have to make sure the people will accept new prices. 'Compensation packages, aimed at cushioning the impact on the poor would be crucial."