Many Consumptions Of Able People, Utilization Of Subsidy Fuels Not In Accordance With Justice Principles

JAKARTA - Research Director of the Institute for Development of Economics and Finance (Indef) Berly Martawardaya assesses that the use of subsidized fuel oil so far has not been in accordance with the principle of justice because the consumption rate is dominated by the wealthy.

"The consumption of fuel is dominated by the community being able, of which 80 percent pertalite and 95 percent of diesel is consumed by groups of people who are able, so it is not in accordance with the principles of distribution and justice," he said in a statement quoted by Antara, Tuesday, September 6.

Berly said there were several factors that caused the government to make fuel price adjustments, including economic recovery after COVID-19 subsided and a Russian invasion of Ukraine that pushed the world's oil price up to 100 US dollars per barrel.

According to him, the compensation budgeted for the 2022 State Budget of Rp. 18.5 trillion is not enough to maintain diesel and pertalite prices.

Through Presidential Regulation Number 98 of 2022, the allocation was also increased to Rp252.4 trillion. However, the increase was still not enough, so it is estimated that an additional budget for fuel subsidies is Rp195.6 trillion until the end of this year.

"The fuel compensation budget of IDR 448.1 trillion is close to 15 percent of the 2022 State Budget, aka exceeding all other expenditure categories except education. Whereas of the three functions of the APBN, namely stabilization, distribution, and allocation, it is not appropriate if the function of stability in this context is the price of diesel and pertalite when global oil prices skyrocket, defeating two other functions," said Berly.

Berly, who is also a lecturer at the Faculty of Business Economy, University of Indonesia, stated that economics is the science of choosing from many imperfect options and there are negative impacts. The challenge for governments and policymakers is to seek and take options with the least negative impacts or late losses.

"With the growth in the second quarter of 2022 reaching 5.4 percent and there is a deflation of 0.2 percent in August, currently the policy option for which the least worse is the reallocation of fuel subsidies by increasing the allocation of social protection and impact mitigation policies," he explained.

Berly said social assistance during the pandemic, which is still far from perfect, according to a BPS study, needs to be improved in the distribution of BBM 2022 Direct Cash Assistance (BLT), due to data from the poor and the last vulnerable was updated with a limited national census in 2015. The government needs to evaluate the data accurately to be announced to the public.

"BLT is a buoy for the poor and vulnerable in Indonesian economic ships that are facing storms so that it remains floating and does not sink, so it needs to be right on target," said Berly.

Berly added that the reallocation of fuel subsidies will historically increase inflation, especially in basic necessities and food, so that the increase in public transportation prices needs to be calculated carefully so that it is not too high and exceeds the increase in operating costs too high.

Formula for the increase in the Regional Minimum Wage (UMP) in Government Regulation Number 36 of 2021 also needs to be revised, so at least it is equivalent to inflation to protect workers' purchasing power.

"Nelayan, who is in the process of looking for fish using diesel, needs special protection and assistance, so they don't lose their livelihoods," he explained.

Berly asked the government to use the reallocation of fuel subsidies as part of a systematic policy towards a green economy by increasing incentives for renewable energy, improving public transportation in urban areas.

In addition, he also asked for job determination and lectures from home at least 40 percent or two days a week to reduce the use of fuel and carbon emissions in the medium term.