Prices Of Subsidy Fuel Rise: The Government Is No More Empowered To Protect People From Gejolaks On World Oil Prices

Officers from a gas station changed the price list for Pertalite Subsidy Fuel from all Rp7650 to Rp10,000. (Between/Gali Pradipta)

JAKARTA - The government has officially decided to adjust the price of subsidized fuel oil (BBM) as of September 3, 2022. This was conveyed directly by the Minister of Energy and Mineral Resources Arifin Tasrif in a press conference with President Jokowi, Minister of Finance Sri Mulyani, and Minister of Social Affairs Tri Rismaharini at the Merdeka Palace on Saturday (3/9).

Pertalite prices increased by Rp2,350 per liter, solar subsidies increased by Rp1,650, and Pertamax increased by Rp2,000. With the details:

"This is valid one hour after it was announced, meaning it will take effect at 14.30 WIB," said Arifin Tasrif.

According to President Jokowi, the government has made every effort to protect the people from the turmoil in world oil prices. However, what is the subsidized budget power and compensation for 2022 fuel has been increased three times from only Rp. 152.5 trillion to Rp. 502.4 trillion. In fact, the estimate will continue to increase.

If you continue to add it, the fuel subsidy will increase and be less targeted. Currently, more than 70 percent of subsidies are actually enjoyed by a group of capable people, namely the owner of a private car.

This is the government's last choice. Diversion of fuel subsidies so that the prices of several types of fuel that have received subsidies have been adjusted. Some fuel subsidies will be diverted for more targeted assistance," said Jokowi.

In the form, BBM Direct Cash Assistance (BLT) of IDR 12.4 trillion was given to 20.65 million underprivileged families of IDR 150 thousand per month for 4 months. The gift is divided into two stages. The first stage is IDR 300,000 in September 2022 and the rest in December 2022.

The government also prepared a budget of Rp9.6 trillion for 16 million workers with a maximum salary of Rp3.5 million per month in the form of wage subsidy assistance given at Rp600 thousand.

I have also ordered local governments to use 2 percent of general transfer funds of IDR 2.17 trillion for public transportation assistance, online motorcycle taxi assistance, and for fishermen. Subsidies must be more beneficial to the underprivileged," said Jokowi.

Finance Minister Sri Mulyani said the amount of subsidies and energy compensation in the 2022 State Budget had been increased 3 times from Rp152.5 trillion to Rp502.4 trillion through Presidential Regulation 98/2022. With the details:

So that the total subsidy and compensation for fuel, LPG, electricity reached IDR 502.4 trillion. This is calculated based on the average of ICP which can reach 105 US dollars per barrel with an exchange rate of IDR 14,700 per US dollar.

"On the other hand, the volume from Pertalite is estimated to reach 29 million kiloliters, while the volume of subsidized diesel is 17.44 million kiloliters," said Sri Mulyani.

He also admitted that the world crude oil price had indeed decreased in the past month. However, this price does not greatly affect the burden on the state budget that must be issued if without subsidy adjustments.

Even the price of ICP oil, which fell to 90 US dollars, is still at 98.8 or almost 99 US dollars. Or even if the price of oil drops to below 90 US dollars, the entire year's average ICP Indonesia is still at 97 US dollars.

"With this calculation, the number of subsidies increases that at that time had been submitted in the media from Rp502 trillion would still increase, not to Rp698, but to Rp653 trillion if the ICP price was an average of 99 dollars, or earlier it fell 90 dollars until December 2022," he explained.

Meanwhile, if the ICP price is 85 US dollars until December 2022, the increase in subsidies will remain at IDR 640 trillion. The difference of IDR 137 trillion or IDR 151 trillion depends on the price of ICP.

"Developments from this ICP must and we will continue to monitor it because the atmosphere of planning politics and the atmosphere of the world's economic projections will still be very dynamic," Sri Mulyani added.

ICP is the average price of Indonesian crude oil in the international market which is used as an indicator of the calculation of oil yields, set every month and evaluated every semester.

Of course, the government will also continue to monitor the impact of inflation and economic growth, as well as the poverty of the fuel price adjustment.

In fact, the adjustment to fuel prices is an effort to create justice. However, subsidies that go through commodities, such as fuel, will definitely also be enjoyed by groups that have private vehicles.

It is better if we transfer the burden of the adjustment value, among others, to the lowest 40 percent group. We estimate that with the additional social assistance of IDR 24.17 trillion, we can reduce the increase in the amount of poverty so that we can still maintain it and even try to decrease through other government programs," said the Minister of Finance.