The Government Should Have Lowered Fuel Prices And Electricity Rates

Refueling illustration. (Photo: Pertamina)

JAKARTA - The world crude oil price has plummeted not only because of the outbreak of the corona virus or COVID-19, but also because of the continuing price war between Saudi Arabia and Russia to date. Due to the drop in world crude oil prices, the Indonesian government was asked to immediately reduce the price of fuel oil (BBM) and electricity rates.

A month ago, February 24, the price of West Texas Intermediate (WTI) reached above 50 US dollars and has now fallen to half, which is less than 25 US dollars.

PT Pertamina did not follow the decline in international oil prices in the first three months of 2020. The price of non-subsidized fuel that follows world economic prices has not changed.

Executive Director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad said the government should have done the price reduction, because in the 2020 National Expenditure and Expenditure Budget (APBN) the written price was US $ 63. Meanwhile, in the field, the price has fallen far beyond the US $ 20-30.

"So of course the actual real revenue for us, either through PNPB Migas, is clearly far from the realization in the APBN. In order to avoid excessive deviation, then automatically later in the APBN or Perppu it must be changed," said Tauhid, to VOI, in Jakarta, Monday, March 30.

Tauhid explained that most of the processed fuel in Indonesia is imported. Of course, according to Tauhid, the price is reduced, because the market price of crude oil is 20 to 30 US dollars, so the government pays much less than what is stipulated in the 2020 State Budget.

"The prices in the field should go down. Either the RON 92 and above, or the lowest premium, should have dropped from the marketed price. Because the basic price is low," he explained.

In addition, the government must also rearrange electricity rates. As is well known, most of the power plants in Indonesia still use fuel as engine power. Tauhid said, because world crude oil has fallen significantly, electricity rates need to be adjusted to the current world oil price.

"The calculation of the basic electricity tariff is one of them using the price of oil, it should have been adjusted. Moreover, most of our power plants use oil, especially diesel and so on. Just following international developments, if it does go down, that should go down," he explained.

However, Tauhid said, lowering electricity rates is not as easy as lowering fuel prices. This is because a meeting between the government and the DPR is needed to discuss it. Meanwhile, to reduce the fuel price, only a ministerial decree is needed.

"It has to go down, now that remains to be determined. As for the state budget and electricity, it must go through a trial. But if the price of fuel in the market does not need to use the trial at the DPR, it is enough that the Ministry of Energy and Mineral Resources sets a new price. "he explained.

In the same opinion, Member of the House of Representatives Commission VII Rofik Hananto asked the government to immediately reduce the price of special assignment fuels, namely premium and subsidized fuel, namely diesel, while still paying attention to the level of economic prices in order to ensure access of the lower class people to this fuel.

Rofik also asked that the price of non-subsidized fuel, such as pertalite and pertamax, be adjusted to the current purchasing power of the people while still ensuring the supply and distribution.

In addition, Rofik said, the downward trend in world crude oil prices by up to 55 percent clearly reduces the Cost of Electricity Provision (BPP). The emphasis on BPP Electricity can be up to 20 percent, especially taken from the BBM element because the most expensive primary energy power plant is BBM.

"The government (can) provide compensation to vulnerable groups of people. These groups are most affected by the COVID-19 virus pandemic, they include informal workers and daily workers," said Rofik, in a written statement, Sunday, March 29.

Rofik explained that the compensation scheme could be in the form of a reduction in electricity rates for the 900 VA and 1300 VA groups. The reduction in the tariff structure is expected to reduce the economic burden on the community.

According to Rofik, the tariff structure is lowered by at least Rp. 250 per kWh by 18 percent, over the next four months, from April to July.

"The lowering of fuel prices and electricity rates will at least help the people's economy, amid the economic slowdown due to the corona virus outbreak," he said.