Unsustainable fuel subsidies<\/p>\n
One of the most difficult decisions facing the new government
\nwill be how to deal with an increasingly exorbitant fuel subsidy
\nsituation. Under the shadow of all-time high crude oil prices, as
\nwell as the fact that Indonesia has become a net oil importer,
\nfuel subsidies are now projected at a staggering Rp 59.2 trillion
\n(US$6.5 billion) up from earlier targets of Rp 14.5 trillion.<\/p>\n
Heavily subsidized fuel prices in Indonesia are amongst the
\nlowest worldwide and the question is no longer if, but when the
\ngovernment will be forced to take action.<\/p>\n
Affordable fuel prices are vital for the day-to-day survival
\nof probably two-thirds of Indonesia's entire population and fuel
\nsubsidies are unlikely to be entirely discontinued for years, if
\nnot decades to come.<\/p>\n
At the same time however, low fuel prices continue to benefit
\nIndonesia's wealthy citizens and encourage massive smuggling.
\nMaintaining fuel subsidies at their present level is no longer a
\nbudgetary option. On the other hand, drastic fuel price increases
\nwould not only result in widespread social unrest but also cause
\nsignificant cost-of-living and across-the-board business
\noperating expense increases.<\/p>\n
While prevailing social and economic conditions preclude
\ndrastic fuel subsidy cuts, available options include the
\nfollowing courses of action.
\nFirst, the introduction of a special \"fuel subsidy surtax\" should
\nbe seriously considered. Since heavily subsidized premium
\ngasoline prices unfairly benefits upper-class and other private
\nvehicle owners, the introduction of a selective vehicle surtax
\ncould be easily introduced without undue popular resistance.<\/p>\n
Luxury sedans based on criteria such as market price, fuel
\nconsumption, etc. should be taxed to the maximum possible whereas
\nlower rates would apply to other privately owned cars or
\ncommercial vehicles. Surtax collections could be easily
\nimplemented based on car registration numbers, whereas public
\ntransportation or other selected vehicles could be exempted
\naltogether.<\/p>\n
With regard to diesel fuel consumption, a detailed user survey
\nwould be needed in order to determine socially and economically
\njustified exemptions.<\/p>\n
Potential diesel fuel surtax targets should also include
\nprivate or company power generators and taxed or exempted on the
\nbasis of realistic and acceptable criteria.<\/p>\n
JOSEPH LOUIS SPARTZ
\nJakarta<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/unsustainable-fuel-subsidies-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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