Indonesian Fuel Price Rise on Hold For at Least Six Months

Ezra Sihite, Robertus Wardi & Arientha Primanita 

The government late on Friday night failed to obtain support from the House of Representatives to raise fuel prices from Sunday, with lawmakers debating alternate policies into the early hours of this morning.

After repeated suspensions to allow lobbying, the House plenary session finally voted to possibly raise the price in six months, at which point the Indonesian Democratic Party of Struggle (PDI-P) staged a walkout.

Under the agreed option the fuel price will only increase if the Indonesian Crude Price exceeds the amount set in the budget by at least 15 percent for six months.

The proposal to increase fuel prices sparked massive protests around the country during the week, including one in which demonstrators crashed through the gates of the House even as lawmakers deliberated.

In the face of these developments, President Susilo Bambang Yudhoyono canceled his plan to attend an Association of Southeast
Asian Nations leaders summit in Phnom Penh on Tuesday and Wednesday, presidential spokesman Julian Aldrin Pasha said on Friday evening.

“The president has decided to remain in Indonesia, close to the people,” Julian said.

Vice President Boediono will replace him at the summit, presidential special staffer Teuku Faizasyah said.

At the plenary the three opposition parties — the PDI-P, the Great Indonesia Movement Party (Gerindra) and the People’s Conscience Party (Hanura) — were firm in their rejection of any fuel price increase.

The ruling Democratic Party initially backed the increase but later modified its stance.

Their plan would allow the government to raise the cost of fuel only if the ICP rose a certain percentage above the $105-per-barrel assumed average of oil prices used to formulate the 2012 state budget.

Initially, they wanted a 5-percent difference but eventually shifted their demand to 10 percent and then 15 percent.

The five other members of the pro-government coalition of parties laid down conditions that would make it impossible for the price increase to take place as scheduled.

Golkar, in its opinion read out by lawmaker Ahmadi Noor Supit, proposed that a “fuel price adjustment” only be made if the ICP was at least 15 percent higher than the 2012 budget price assumption for six consecutive months.

Ahmadi said while at first the party had understood the need for a price increase, “When the people began to make demands of the parties, we conducted a review. We reject an increase in the price of fuel.”

The Prosperous Justice Party (PKS), a coalition member, wanted the ICP gap to be at least 20 percent, while coalition member the National Awakening Party (PKB) and the United Development Party (PPP) pushed for 17.5 percent and 10 percent, respectively.

The National Mandate Party (PAN) joined Golkar in demanding the ICP be at least 15 percent higher than the assumed price.

Finance Minister Agus Martowardojo said the government could not yet estimate the fiscal risks of leaving fuel prices alone, but said the law dictated that the deficit must not exceed 3 percent.

Purbaya Yudhi Sadewa, chief economist at the Danareksa Research Institute, said the deficit risked surpassing 3 percent but that it would not have too much of an impact on the economy.

“In reality, it would not be a problem, the market can absorb it and remain positive,” he said.

Additional reporting by Agustiyanti & Kunradus Aliandu


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