Some Reasons For Fuel Must Rise That May Not Be Community

Illustration of subsidized fuel (Visual Karsa on Unsplash)

YOGYAKARTA The signal of an increase in the price of Pertalite and Subsidy Solar Oil (BBM) types continues to be revealed by the Government, both from President Jokowi and from his ministers. The signals are in the form of reasons why fuel must rise from prices that are now valid to new prices.

Although the policy of increasing fuel prices reaps pros and cons, there are several reasons for the increase in fuel prices that the government may take. The reason is as follows.

Minister of Finance (Menkeu) Sri Mulyani Indrawati had openly said that the ability of the state budget to bear energy subsidies was too heavy. The energy subsidy figure itself reached Rp502 trillion. This was revealed when holding a Working Meeting with Committee IV DPD, Thursday, August 25, 2022.

For information, the value of subsidies and compensation usually only reaches approximately Rp. 100 trillion per year. However, with the current global dynamics and high prices of energy commodities, the government forces the government to use fiscal instruments by disbursing greater value.

According to the 2022 State Budget assumption, the Government has set a subsidy allocation and energy compensation of Rp. 152 trillion. This figure is taken assuming the macro oil price is US$ 64 per barrel and the rupiah exchange rate is Rp. 14,450 per US dollar.

Unfortunately, there was an increase in world oil prices, so the government was forced to apply for additional energy subsidies and compensation to Rp502 trillion. The increase is stated in Presidential Regulation (Perpres) Number 98 of 2022.

This figure is set on the assumption that crude oil prices reach US$ 100 per barrel, an exchange rate of Rp. 14,450 per US dollar, and a volume of 23 million kiloliters by the end of 2022. The price of crude oil continues to increase to reach above US$ 100 per barrel with a rupiah exchange rate of Rp. 14,750 or a weaken of around 4%.

When we submitted it to the DPR to increase the subsidy budget, we used the assumption that US$ 100 per barrel. January to July 2022, the average price of the ICP is at US$ 105, so there is a difference between US$ 5, explained Sri Mulyani.

As a result, the subsidies and compensation that have been re-determined are insufficient. The government still has to increase Rp195.6 trillion if the fuel subsidy policy is returned until the end of 2022.

What is quite unfortunate is that the majority of subsidized fuel is not right on target. Instead, those who enjoy subsidized fuel are the upper middle class.

For example, of the total Pertalite quota of 23 million kiloliters, only 3.9 million kiloliters were enjoyed at the bottom of 40%, while the 15.8 million kiloliters that enjoyed were high-end people.

As for the Solar quota of 15 million kiloliters, what people enjoy down is only less than 1 million kiloliters.

Indeed, there are underprivileged and poor people who enjoy subsidies but the portion is small, this is what we need to think about. If we add hundreds of trillions, it means that we add more to those who can afford it. I think the aspect of justice is very important, said Sri Mulyani.

Subsidies are also given for Pertamax. This type of fuel turned out to have received a subsidy from the government of Rp4,800. This is as revealed by Sri Mulyani.

"So even if even the Pertamax are consumed by cars that are usually good, it means that the owners are also capable, they get a subsidy of Rp4,800," he explained, quoted from VOI.

Those are some reasons why fuel must go up which must be understood by the wider community. To monitor policies related to fuel, visit VOI.ID.