The Jakarta Post
President Joko “Jokowi” Widodo has called on state-owned oil and gas holding company Pertamina to reduce the price of aviation fuel (avtur) to lower air ticket prices, but an economist says that it will only further burden the company.
Instead, Institute for Development of Economics and Finance (Indef) researcher Abra Talattof said the government needed to cut value-added tax (VAT) for avtur, which is at 10 percent in Indonesia, while in Singapore it is 7 percent.
“Can the finance minister stimulate the industry through a VAT cut? At least it should be made competitive with our neighbor,” said Abra in Jakarta on Tuesday as quoted by kompas.com.
The government could also eliminate the fee that should be paid by Pertamina for selling avtur at airports because airports in other countries did not collect such fees, he added.
“The stakeholders need to discuss the issue to find the best solution,” he said.
Previously, President Jokowi blamed Pertamina for the high price of avtur when he received complaints from tourism players about the low occupancy rates of hotels in many regions of the country.
The President gave two options to the company – allow other players to sell avtur at Soekarno-Hatta International Airport or voluntarily lower avtur prices.
On the allegation that Pertamina monopolizes the avtur business, Abra said it was not completely true because regulations did not prohibit others from selling avtur, but required businesses to sell avtur in at least three airports.
Abra added, however, that lowering avtur prices would affect the financial performance of Pertamina.
“It is not good. It would further burden Pertamina amid pressures faced by the company,” he said, referring to the requirement for the company to implement a number of government programs like the single fuel price policy. (bbn)