by Abu Hanifah
JAKARTA, July 12 (Xinhua) -- The Indonesian government has adopted new policies aimed at reducing the swelling domestic flight fares that have significantly exacerbated a few business sectors in the country in the past several months.
Domestic flight fares that have gone higher up to 50 percent apparently has slowed down tourism, hotel, travel agents and cargo businesses since January.
People are hardly able to cope with the high fares charged by domestic airlines controlled by two largest operators in the country: the state-run Garuda Indonesia and private airlines group of Lion Air.
Due to the skyrocketing flight fares, Indonesia Tourism Minister Arief Yahya said that domestic tourism has dropped 30 percent in the first three months this year.
Meanwhile, the number of plane passengers continued to dive since early this year with significant drop seen in March at 6.03 million, or 21.94 percent lower than that of the same period last year, Indonesia's Central Statistics Bureau (BPS) said.
Citing the expensive operational costs, such as fuel price, ground handling and the increasing national currency exchange rate against the U.S. dollar, the two dominating airlines groups are reluctant to reduce their new fares that have been applied since late last year.
Responding to the developing situation, Indonesia President Joko Widodo signed a decree to annul the value-added tax (VAT) to lighten the airlines' operational burden.
Through the decree the airlines get zero tax to hire planes, import planes from foreign producers, and import aircraft parts.
"The government would also provide fiscal incentives for airlines willing to reduce their fares by 50 percent. The fare-cut policy would be applied on certain amount of flight seats in each airlines' flight schedules," Secretary of Coordinating Minister for the Economy Ministry Susiwijono Moegiarso said on Wednesday.
The president's decree to address the swelling flight fares issue will take into effect no later than Friday this week, Susiwijono said.
He said the government would closely monitor and evaluate implementation of the order on weekly basis so as to assure reduction of domestic flight fares to affordable level in the future.