The increase in the price of Pertamax must be directed to protect the purchasing power of vulnerable groups

Illustration. (Photo: Dok. Antara)

JAKARTA - Permata Bank Chief Economist Josua Pardede assessed that the policy to mitigate the effects of the increase in the price of non-subsidized Pertamax fuel oil (BBM) needs to be directed to protect the purchasing power of vulnerable groups.

Josua explained that Pertamax type fuel was more targeted at the middle and upper class private vehicle user group, so that the impact on the vulnerable group was not as large as when Pertalite went up.

However, he said, a significant increase could still spill over into transportation costs, distribution of goods, service rates, and food prices.

"Therefore, the focus of policy must be to maintain the purchasing power of vulnerable groups and prevent price increases from spreading to basic necessities," said Josua, quoted by Antara, Saturday, June 13.

He suggested that the government strengthen targeted social assistance (bansos) for vulnerable households, informal workers, public transportation drivers, small fishermen, and micro, small, and medium enterprises (MSMEs) affected by the increase in transportation costs.

Assistance can be provided in the form of temporary cash assistance, food assistance, and distribution cost support.

In addition, the central and regional governments are also advised to maintain food price stability through strengthening food reserves, market operations, inter-regional distribution, and food transportation subsidies from surplus areas to deficit areas.

This step is considered important considering that low-income groups allocate most of their expenses to food needs.

In the transportation sector, the government is also recommended to provide temporary support for public transportation, distribution of basic necessities, and small-scale logistics to prevent too rapid a rise in tariffs.

This policy needs to be evaluated periodically and only given to actors who meet the criteria.

At the same time, the government needs to tighten supervision of the use of Pertalite so that there is no massive transfer from non-subsidized fuel users to subsidized fuel. Strengthening vehicle data collection, limiting the volume of purchases, and supervision at gas stations are considered important to prevent subsidy leakage.

The price of inter-type fuel must also be ensured so that it does not have too extreme differences.

The government is also asked to help MSMEs maintain production costs, for example through low-interest working capital financing, temporary postponement of burdensome regional levies, assistance for marketing digitization, and distribution subsidies for food commodities and basic necessities.

"However, assistance for MSMEs must be selective so that it does not become a leaked and inaccurate spending," he added.

In the medium term, energy subsidy reform is suggested to be directed from commodity subsidies to beneficiary-based subsidies.

This policy needs to be accompanied by improvements in public transportation, the development of energy-efficient vehicles, and increased energy efficiency to reduce people's dependence on fuel.