TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Analysis: Government faces dilemma over raising subsidized fuel prices
The government is scratching its head over whether to increase subsidized fuel prices. The surging global prices of crude oil has forced the government to provide more energy subsidies this year.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
An attendant walks across a gas station belonging to state-owned energy holding company Pertamina in Kuningan, South Jakarta, on Monday, December 4, 2018. The State-Owned Enterprises Ministry said Pertamina was among 10 state-owned companies with the largest debt. (JP/Seto Wardhana)
T
he government is scratching its head over whether to increase subsidized fuel prices. The surging global prices of crude oil has forced the government to provide more energy subsidies this year. At the same time, however, sources have said it remains wary about increasing subsidized fuel prices, fearing that it could spark inflation and possibly a series of demonstrations. Thus, it has opted to limit consumption.
The government has maintained the price of subsidized diesel and biodiesel at Rp 5,150 (34 US cent) a liter, even though its economic price is actually Rp 18,150 per liter. Meanwhile, the price of subsidized RON-90 Pertalite is kept at Rp 7,650 a liter, compared to its economical price of Rp 17,200. Subsidies could reach Rp 19 million per car per year and Rp 3.7 million per motorcycle per year. Without fuel price increases, energy subsidies are expected to double this year to Rp 502 trillion from the initial budget.
The government, however, won’t dare increase the price of subsidized fuel, fearing political backlash. Sources said that President Joko “Jokowi” Widodo had summoned high-ranking officials from the National Police, the Indonesian Military (TNI) and the State Intelligence Agency (BIN) asking their opinion about possible fuel price increases, but all the invited officials did not recommend increasing subsidized fuel prices. (See What we’ve heard)
Jokowi said recently that the government had dipped deeper into its pockets to subsidize car and motorcycle owners and warned the people that if the government could no longer afford it, it would have to increase fuel prices. He said that energy subsidies this year, which were expected to swell to Rp 502 trillion, were worth enough to build the new capital city, Nusantara, which he said needed only Rp 466 trillion to build.
During a meeting with chief editors at the State Palace earlier this month, the President said the government would not increase subsidized fuel prices until the end of this year while hoping that crude oil prices would eventually fall. The government, Jokowi said, does not want to burden the people at a time when the price of other basic commodities was also on the rise.
Presidential Chief of Staff Moeldoko said earlier this week that the government was considering changing the subsidy mechanism to target more poor people, from subsidizing commodities such as fuel to channeling cash subsidies directly to them. That would be less costly for the government, he said.
To prevent another spike in subsidies, the government has opted to limit the consumption of subsidized fuel. Without limitation, consumption of subsidized fuel would easily surpass the budget’s quota of 14.9 million kiloliters of diesel and 23 million kl of Pertalite this year. The government tasked state-owned oil and gas holding company Pertamina with limiting the consumption of subsidized fuel. Pertamina then asked eligible car owners and motorists to register themselves through the MyPertamina app, which triggered outcry among motorists.
