When the government decides not to raise fuel prices, much of the\npublic may welcome it with joy. However, for the state, the implications\nof this decision are actually very burdensome. Pressure on the state\nbudget (APBN) is certain to increase dramatically along with the\npotential swelling of the energy subsidy budget\u2014which is predicted to\nreach hundreds of trillions of rupiah. The question is, in a situation\nwhere fiscal space is limited, where then can alternative funding\nsources come from to stem the surge in subsidies needed by the\nstate?<\/p>\n
Relying solely on the expansion of fuel subsidies through the\nstrength of the APBN is certainly not easy. Amid limited APBN funds, one\npossible opportunity is to rely on drawing new debt. However, the risks\nare undoubtedly very heavy if the APBN\u2019s strength is only supported\nthrough additional new debt. For the short term, foreign debt does\nbecome an instant solution to patch the funding needs in the APBN. But\nin a situation where foreign debt is already so large, additional new\ndebt will certainly make the APBN position even more difficult.<\/p>\n
Alternatives<\/p>\n
To prevent the APBN from becoming even more burdened, what is\nactually needed now is fiscal creativity and shifts in sustainable\nfunding sources\u2014without risking adding a heavy burden to our APBN. In\nbroad terms, there are several interesting alternative funding sources\nthat warrant further elaboration.<\/p>\n
First, the most logical alternative is to utilise the surge in oil\nprices itself as an additional funding source for the APBN. When global\noil prices rise, state revenues from the upstream oil and gas sector\n(Non-Tax State Revenue\/PNBP) should also increase. Although not too\nsubstantial, Indonesia is also a country with quite potential oil and\ngas resources, so to some extent Indonesia benefits from the domino\neffect of rising global oil prices.<\/p>\n
The government in this case could lock in the excess PNBP from oil\nand gas to finance the additional fuel subsidy needs. This is a\n\u201ccross-subsidy\u201d mechanism from the fiscal side. In addition, fuel\ncompensation funds that the government has been paying to Pertamina can\nbe optimised by tightening efficiency in governance from upstream to\ndownstream. By cutting bureaucracy and distribution leakages, the saved\ncosts can be redirected to hold back retail fuel price increases.<\/p>\n
Second, how to ensure that subsidies provided to the public from APBN\nfunds are truly on target. Whether acknowledged or not, it has long been\nsuspected that there is still much bias and inaccuracy in subsidies,\nbecause the beneficiaries are not always those who truly need them.<\/p>\n
Learning from experience, the main problem triggering subsidy\nswelling is not merely high oil prices, but rather misdirected subsidy\ndistribution. To date, it is suspected that most subsidies are actually\nenjoyed more by the affluent segment of society who use non-subsidised\nfuels. It is common at various petrol stations that vehicles filling up\nwith Pertalite-class fuel are not always poor people. Many mid-range\ncars and official vehicles freely fill up with subsidised fuel. This is\nwhat causes deviations or bias in fuel subsidy allocation.<\/p>\n
Third, the most urgent alternative APBN funding can be obtained from\naccelerating the digitalisation of energy distribution, such as using\napplications or special cards for purchasing subsidised fuel. The funds\nsaved from this new distribution model\u2014which could be worth tens of\ntrillions of rupiah\u2014can be directly redirected as Energy Direct Cash\nAssistance (BLT) to poor and vulnerable families. This approach is\nfairer, more measurable, and does not burden the APBN recklessly.\nAlthough subsidies are part of populist programmes not oriented towards\nempowerment, by ensuring no bias in their distribution, they will\nundoubtedly be more beneficial.<\/p>\n
Fourth, amid high dependence on oil, one possibility for seeking\nalternative funding sources is to find other energy sources. We realise\nthat amid the pressure of rising fossil fuel prices, this moment must be\nused as momentum to accelerate the energy transition. An innovative\nfunding alternative that can be taken is issuing Green Bonds or\nSustainability-Linked Bonds.<\/p>\n
Seeking alternative funding sources is indeed not easy. Therefore, if\nalternative funding sources can be obtained, it must be ensured that the\nincoming funds are not used for fuel subsidies, but rather to finance\nthe development of renewable energy infrastructure\u2014such as PLTS (Solar\nPower Plants) or electric vehicle (EV) infrastructure. By drastically\nreducing dependence on oil natural resources in the long term, fiscal\npressure due to fluctuations in crude oil prices in the future will\ndecrease.<\/p>\n
Energy Independence<\/p>\n
The rise in global oil prices is an unavoidable external factor. This\nis a loud alarm that truly impacts Indonesia\u2019s fiscal condition. It\nforces us to realise that fossil fuels are limited resources whose\nprices tend to be sensitive to geopolitical conflicts.<\/p>\n
Maintaining people\u2019s purchasing power amid rising global oil prices\nis indeed a top priority. However, financing subsidies in a conventional\nway, namely relying solely on the strength of the APBN, is actually just\n\u201cpostponing the crisis\u201d. This is an action that does not solve the root\nproblem.<\/p>\n
Alternative funding outside the APBN\u2014from optimising PNBP, reforming\ntargeted subsidies, Green Bonds, to other alternative funding sources\u2014is\nthe combination needed. The policy needed now is not courage to raise or\nmaintain prices through subsidies.<\/p>\n
For Indonesia<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/alternative-funding-sources-for-fuel-subsidies-1775616742", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }