Friday, August 8, 2014

Fuel Subsidy in Indonesia



Fuel Subsidy in Indonesia becomes larger since several years. Comparing with Indonesian Budget, fuel subsidy is approximately 20% from the total budget. Growing fuel and electricity subsidies in Indonesia burden its economy to climb up to be middle up country. Nowadays, many countries in Asia abandon fuel subsidy due to many reasons.

Subsidy by definition is something given to poor people to help him increase standard of living. From this definition, subsidy is not given to many people. Subsidy is also given to straight forward to people, not to consumable product like fuel.

This cause fuel subsidy is not on the goals. Rich people with luxurious car also take a queue in the gas station to consume premium gasoline. Habitual of Indonesian people to consume cheap fuel make them waste fuel. They forget that gasoline in sometime will be gone. Oil production in Indonesia decreases dramatically due to lack of new invention in exploration field.

Indonesian Government set fuel subsidy based on Mid Oil Plats Singapore (MOPS) + Alpha. Alpha is margin given to Pertamina and other company which has duty to distribute fuel around Indonesia. Theirs cost of production have not to exceed alpha.  This cost of production consists of exploration cost, refinery cost and distribution cost.

 In 2014 based on National Budget revision (APBNP), target of fuel subsidy is 46 million KL. This number is larger than actual fuel subsidy consumption in 2013 by 44 million KL. Total number of fuel subsidy is around 300 trillion. This fantastic number can switch to another need like transportation, education, infrastructure and many more.

Now, Indonesian Government struggle to keep fuel subsidy consumption not to exceed 46 million KL until 31 December 2014. They make policy to restrict purchase of premium and solar in some gas station. Pertamina and PT INTI are installing fuel restriction tools (called RFID) as an another way to restrict purchase of fuel.

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