It is reported that the government decided to increase the oil price. It will be in the range of Rp. 6500 per liter. The government argues that the decision is taken to lessen the abundance of subsidy that is too large. Indeed, the subsidy of fuel in the State Budget of 2013 reached Rp. 274.7 Trillion. The government assesses the subsidy that all this time is more enjoyed by rich people. Really?
Based on the National Economic Survey 2010 there was 65% of poor and lower-middle people use oil, 27% of middle class, 6% upper-middle and only 2% of the rich. From the total of vehicles, about 53, 4 million in 2010, in Indonesia, 82% of it is two-wheeled vehicles that are in majority owned by the lower-middle class. This shows that the lower-middle class is still dominant as a fuel consumer. So, the increase of fuel price will be surely become miserable for the people.
If the government sees the fuel subsidy is much enjoyed by rich class, he should be honest that the rich class who has no right to enjoy subsidy is not only the user of private cars but also the industries that receive benefit from the leakage of fuel subsidy or smuggle the fuel to abroad. BPH (Oil and Gas Regulator) confessed that oil and gas subsidy that is enjoyed by industries or smuggled to abroad are very significant. It can be seen from the hundreds of revealed cases. Lessening the consumption of oil subsidy without lessening the consumption of one who has no right to enjoy it will not lessen consumption significantly.
Furthermore, another rich class who enjoy the fuel subsidy are brokers who supply crude oil and fuel to Pertamina. It is not a secret that a handful of entrepreneurs play a role in this field continuously because they have connections with the power. Therefore, in order the subsidy is not enjoyed by the entrepreneurs, the government should have political will to support Pertamina to make a direct contract with the World Oil Producers and avoiding the intermediary company. It will make a very important impact; the price of crude oil can be lowered according to subsidy calculation of Pertamina.
Finally, oil and natural resources management must be ensured for people’s interest. As it is known that in every joint meeting for the economy such as G-20, APEC and bilateral joint meeting, Indonesia is always “advised” to cut subsidy. Recently, the rating agencies also support government by saying “It is the time” to increase the oil price – precisely remove the subsidy. The investment grade will be troubled is an effective threat to pressure the government. Whereas, the price of oil is not the only reason that influences the rate of competitiveness. There are still many problems to upgrade the competitiveness. Therefore, mapping the problem and considering policy choice must be scrupulous and prioritize national interest not foreign countries or foreign institution.
But in reality, all advices above are never done by the government. Pertamina is continuously allowed to use an intermediary company in selling and buying crude oil. Also, there is not a serious effort to anticipate the leakage and the smuggling of oil. Even though the government knows that the lower-middle class is the main consumer but they still want to increase the oil price. Those all show that the policy to increase the oil price is not for saving the state budget for the sake of people but it is for granting foreign interest through liberalization in the downstream sector. The goal is how to make the domestic selling price equal with the international price. It is an awaited moment for foreign corporations because they can trade freely in the country without subsidized oil.
Muhammad Ismail Yusanto
Spokesperson of Hizb ut Tahrir in Indonesia