Govt replaces fuel subsidy coupon by cash transfer

The government has decided to drop earlier plans to introduce a coupon system for fuel subsidy mechanism, according to the Coordinating Minister for Economy, Finance, and Industry Kwik Kian Gie.

Kwik was quoted by Kompas daily as saying that instead of providing coupon, the government would transfer cash to the targeted group.

He said that the new plans would be further studied by a team under the Ministry of Finance.

Kwik and other senior government officials held a meeting on Thursday on this matter.

The government has decided to raise fuel prices by an average 12 percent starting next month. But the government also has said that the price of kerosene for poor families would not change as well as the price of premium gasoline and automotive diesel for public transportation.

Iin Arifin Tahyan, an expert to the Minister of Mines and Energy, said that the poor families could get the cash from their respective village leaders, while the public transportation company could get the cash from the Organda public transportation organization.

Only Organda members will receive subsidy.

Hours before the government decided to change into the new mechanism, the House of Representatives commission VIII on mines and energy had already proposed the cash transfer system to replace the coupon system.

Commission head Irwan Prayitno said that the coupon system had many weaknesses including high risk of counterfeit and the high cost of producing the coupon.

Irwan was quoted by the Bisnis Indonesia daily as saying that the cost of producing the coupon was almost the same of the fuel subsidy for the poor at around Rp 320 billion.

Several economists had earlier called on the government to delay the fuel price increase for a couple of months if the subsidy system was not yet ready.

"This is a sensitive issue. It's better delayed ? because if it's not prepared well it could explode," said University of Indonesia economist Muhamad Ikhsan. (*)