Oil Price Hike

By: Satria Kusuma Diyuda
Plenary situation

17 June 2013 is a defining moment for Indonesian government because the House would decide the government proposals on reducing fuel price subsidy and budget revised 2013. Some faction in the House of Representatives, only PDIP and Hanura faction were consistent from beginning to reject the articles in the 2013 revised budget proposal in which there abatement subsidies. PDIP rejection mainly related to the articles:

1.      Article 6 paragraph 2: the central state budget amount in total is Rp. 1.193.295.160.804.000.

2.      Article 6, paragraph 4: The total number of central and local government budget of Rp. 1,722,030,421,717,000.

3.      Article 8, paragraph 1: Subsidies on oil fuel and liquid gas for fiscal year 2013 was Rp. 209,915,353,400,000.

4.      Article 16, paragraph 1: The education budget is estimated at Rp. 344,406,083,663,000.

5.      Article 17, paragraph 1: Number of state budget revenues in 2013 are a budget deficit of Rp. 233,704,957,128,000.

6.      Article 17, paragraph 2: Deficit financing is obtained from: a. Domestic financing (domestic debt) Rp. 250,574,787,921,000, b. Foreign financing of (foreign loan and grants) Rp.16.869.830.793.000.

While the PKS faction rejected the government's draft budget 2013 for the following reasons:

1.      PKS asks scale macroeconomic GDP growth of 6.5%, 6% and inflation of 1.36 million bare Gas lifting of oil equivalent per day, lifting 865,000 barrels of oil per day and there is no increase in fuel prices.

2.      the number of people who reject the fuel price are increase, which means the government rejected the proposal in the revised budget 2013.

3.      PKS faction viewed that reducing the fuel subsidy does not look right because Indonesia has not managed controlling subsidized fuel for national energy governance. Therefore, it is connected to the development of mass transportation which has been no mass transit populist.

Hike subsidized fuel is not appropriate because it would disrupt people's purchasing power before the month of Ramadhan and Eid al-Fitr, in which this will add the number of the poor and create new poor people[1]. The fraction PKS rejection against the government's proposal is resulting on the emergence of the threat of the coalition parties to issue a government and a coalition of PKS. However PKS has projected to accept the consequences of refusing APBNP 2013 decision and it would be dismissal from coalition.

Table 1. Subsidize Budget 2012-2013 (billion Rp.)[2]

Item	Realization Budget 2012	Revised Budget 2013
Energy	306.478,7	309.895,0
1.      Oil Fuel and Liquid Gas for Housholds	211.895,7	209.915,4
2.      Electricity	94.583,0	99.979,7
Non Energy	39.941,7	48.289,3
1.      Food	19.117,0	21.497,4
2.      Fertilizer	13.958,5	17.932,7
3.      Seed	60,3	1.454,2
4.      Public Serivice Oblogation	1.932,4	1.521,1
5.      Lending Interest Rate Subsidize	1.110,4	1.248,5
6.      Tax Subsidize	3.763,2	4.635,5
Total	346.420,4	358.184,4

On the other hand, members of the Shura council and ministry from PKS Party state that  PKS faction on parliament has been breaking the Lembang deal, where PKS Party is incorporated to the government and they should support the government's policy, especially policy of subsidy reduction. The differences of this PKS stance between Shura council and the PKS faction on parliament have raised a number of questions about the division split on PKS Party.

While Gerindra faction stance in parliament has changeable views, when the early discussion on revised budget 2013, the fraction of Gerindra have ambiguous it because there are not any instructions from the Gerindra party chairman, Prabowo, to address the reduction of fuel subsidies. On June 13, 2013, Hasym Djojohadikumo, vice chairman of Gerindra commented that the distribution of BLSM terms with political interests, but add that Gerindra Party received a subsidy cuts for oil fuel[3]. at the beginning of the plenary, Gerindra faction said that they support the policy of the State Budget 2013 and the reduction of subsidies by the government as well as the distribution BLSM. The reason behind Gerindra decision to support government policy is because the rising of the fuel prices cannot be avoided, but they give a note related to BLSM distribution where the government should not distribute aid in the form of money but in form of goods.

Gerindra Fraction attitude did not last long in support of government policies related to subsidy cuts and BLSM. At the last moment before the voting of taking decision on budget revised of 2013, the Gerindra party switch over and choose to reject the budget revised in which there are subsidy reduction and BLSM distribution policy. They reason that it could not be understood that subsidy can burden the budget state and there are no assurances that if the government cut the subsidy could give welfare to among the people.

Meanwhile Hanura Fraction is one of the opposition that rejected the budget revision and oil subsidy reduction. Their reasons have same substation with other opposition fraction the house. Particularly Hanura Fraction saw that the reducing subsidy is not right, it is because Indonesian Crude Oil Price (ICP) now less than US$ 100. Also in this moment oil subsidies reducing could torment the people because it is near to the Ramadan, it might impact the food price to be double increases[4].

Hanura faction in the plenary session also technically disputed that the 2013 state budget bill only included articles were revised as a discussion. It is against the provisions of the bill-making, in which the article should not be revised and the revised chapter materials featured in the plenary session, there will be a section for fear of missing or changed and reduce substance. Hanura faction also criticized the size of the state budget in 2013 related to government compensation fund for victims of Lapindo mudflow of Rp. 155 billion. This case is the responsibility of Bakrie which is currently serving as chairman of the Golkar. So it is not appropriate for the government if they are entirely responsible for Lapindo victims, associated with the state budget. On this basis Hanura faction in the House of Representatives balked 2013 revised budget proposal from the government.

Coalition Party Situation

While the coalition factions in the House unless the PKS, accepted the government's proposal of cutting the fuel subsidy and distribution BLSM direct compensation and the government's proposed 2013 state budget. However, prior to the plenary of the House of Representatives, there are some members of the coalition parties which also reject the fuel price hike like Bambang Susatyo (FPG), who stated that all members of the Golkar faction rejected the government's policy to increase fuel prices few months earlier.

Meanwhile, Ahmad Yani lawmakers from PPP, also at the beginning of the plenary threatened to defect from his faction and to reject the revised budget policy in 2013. He argued that it should be government responsible to give the people subsidies. He planned to abstain when the voting began, if his fraction (PPP) still supports subsidy reducing on oil fuel[5]. Nevertheless, both Bambang Susatyo and Ahmad Yani do not realize their plans to reject the Budget Revised of 2013. They might be received threats to be fired from the party membership if they plan to reject the government proposal.

Extra Parliament to Reject Oil Cut Subsidy

After the decision of the voting results of the revised budget 2013 approved by parliament, future clashes in front of the Parliament courtyard between the police and the demonstrators were made ​​up of students, workers and communities. Until a few hours later the police managed to disperse the demonstrators. A day after a plenary session at the Parliament, the situation in Jakarta is still heavily guarded by the police, particularly around the Palace, Parliament Building and National Monument. This is to anticipate the possibility of a demo that will be closed to the presidential palace and the Parliament. Some information said that there will be 1000 demonstrators closing the Parliament courtyard this Tuesday[6]. Tightening custody by police also anticipate the threat of a member of Parliament from PDIP, to bring 15,000 people to march past in front of the palace and the House of Representatives, if the House plenary proceeds received revised budget 2013 and the reduction of fuel subsidies[7].

Chart 1. Vote Result on Budget State Revision 2013 and Oil Price Hike

Various regions in Indonesia, especially in big cities such as Medan, Surabaya, Makassar and Ambon, various community groups held a demonstration reject the fuel price increase that has occurred several days before the plenary session. In Makassar city, clashes between students and the police causing several casualties. In Medan, Rector of the University of HKBP Nommensen and its students arrested by the police for carrying out a demo, that led to anarchy[8]. Possibility in the next few days, the demonstrations are still going on and will reach its peak when the president announced an increase in fuel prices.

Announcement of Fuel Price Hike

Over the issue of fuel price hike rolled out by the government, food prices in traditional markets in Indonesia begin to creep up. It is an old custom in Indonesia if there are certain situations such as the issue of fuel price hike or the announcement of the rise of civil servant salary. The increase in food prices on the eve of establishment of rising fuel prices are also a lot due to the hoarding of food by the distributor. In many ways the big distributors are taking advantage from uncertain political and economic situation in Indonesia[9]. So far, the government is not able to regulate the structure of the market for agricultural products. So  that both farmers and urban communities much aggrieved by the distributor[10].

Chart 2, Inflation in 2013[11]

Table 2. The Number of Poor People in Indonesia (000)[12]

Month	Urban	Rural	Total
Sep-12	10.507,80	18.086,90	28.594,60
Mar-12	10.647,20	18.485,20	29.132,40
2011	11.046,75	18.972,18	30.018,93
2010	11.097,80	19.925,60	31.023,40
2009	11.910,50	20.619,40	32.530,00

Vice President the day after the ratification of the revised budget 2013, said that the announcement of fuel price increases do not take place on June 18, 2013, because government constrained by the process of preparing the administrative mechanism of price increases and complete compensation mechanism BLSM system[13]. The possibility of government announcements related to the official fuel prices will occur most rapidly a few days after the plenary meeting and no later than 1 week ahead. Following the announcement by the President of the fuel price hike, a day later the channeling BLSM will be soon phased in throughout Indonesia.

Several weeks before the plenary, the government has been dealt the cards of social protection to the poor people who used to get government assistance rice. Social security card division is intended to 15.5 million poor households[14] where the total poor population in Indonesia amounted to 28.6 million[15]. While the amount of funds channeled to BLSM agreed in plenary voting results at the House of Rp. 9.3 trillion disbursed within a period of 4 months. Where poor households will receive aid amounting to Rp. 150,000 monthly pereach.

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[1] http://news.okezone.com/read/2013/06/17/339/823169/ramadan-salah-satu-alasan-pks-tolak-harga-bbm-naik

[2] In revised budget, Oil fuel and Liquid Gas subsidize base on four componen 1. Indonesian Crude Oil Price (ICP); 2. Underpayment of subsidy on fuel and Liquid gas Rp. 32,2 millin in 2010, Rp. 4.029,7 billion in 2011, and Rp. 18.846,7 billion on 2012; 3. Oil fuel Subsidy for 48 million kilo liter ; and 4. LPG subsidy for 3,86 million metrik ton

[3] http://www.metrotvnews.com/metronews/read/2013/06/13/1/161071/Hashim-Djojohadikusumo-Khawatir-BLSM-Bernuansa-Politis

[4] http://www.republika.co.id/berita/nasional/politik/13/06/17/moixlp-hanura-konsisten-tolak-kenaikan-bbm

[5] http://news.okezone.com/read/2013/06/17/339/823097/tolak-kenaikan-bbm-ahmad-yani-membelot-dari-ppp

[6] http://wartaekonomi.co.id/berita12074/1500-personel-amankan-demo-susulan-di-dpr.html

[7] http://news.detik.com/read/2013/06/17/125938/2275472/10/pdip-ancam-turunkan-15-ribu-orang-kepung-istana-jika-harga-bbm-naik?nd771104bcj

[8] http://m.merdeka.com/peristiwa/demo-bbm-mahasiswa-dan-rektor-uhn-medan-diamankan-polisi.html

[9] [9] http://metro.sindonews.com/read/2013/06/18/31/751104/imbas-kenaikan-bbm-makanan-di-depok-merambat-naik

[10] http://www.jambi-independent.co.id/jio/index.php?option=com_content&view=article&id=18115:mafia-kendalikan-bahan-makanan-di-jambi-&catid=6:ekobis&Itemid=8

[11] www.bi.go.id

[12] www.bps.go.id

[13] http://bisnis.news.viva.co.id/news/read/421636-wapres--hari-ini-tidak-ada-pengumuman-kenaikan-harga-bbm

[14] http://www.antaranews.com/berita/380679/blsm-bukanlah-jawaban

[15] http://www.bps.go.id/tab_sub/view.php?kat=1&tabel=1&daftar=1&id_subyek=23&notab=1