Budget disaster or energy policy

Budget disaster or energy policy

The recent increase of fuel prices, which sparked debate among
the general public, could have been hindered from the onset.
Indonesians have been used to enjoying subsidized fuel, at least
from the first oil boom in 1974 at a time when domestic
consumption was low, and the burden of the state budget was
relatively surmountable.

The high dependence on this sort of non-renewable energy,
especially for the industrial and transportation sectors, has
forced the government to continually set aside large amounts of
state budget funds to subsidize fuel prices.

After some protests, no less than three ministers said that
for the time being, there would be no more fuel price increases
because, as stated by minister of energy Purnomo Yusgiantoro,
crude oil prices will likely come down due to the upcoming summer
in the northern hemisphere. In the 2005 proposed revision of the
state budget, it was allocated as much as Rp 39,8 trillion,
assuming a price of US$35 per barrel, while the world has seen
the current price hover at more than $57 per barrel (Koran Tempo,
March 29).

On the other hand, as the price of crude oil according to an
investment bank Goldman Sachs study, is predicted to be traded at
more than $100, and is foreseen to last for several years because
of strength in oil demand and economic growth especially in the
United States and China (The Jakarta Post, April 4), the
government should then set aside a "disastrous" fuel subsidy,
probably as much as Rp 90 trillion.

Consequently, in order to overcome this budget disaster that
leads to an insurmountable huge budget deficit, it is high time
for President Susilo Bambang Yudhoyono to, as soon as possible,
set up a national energy policy by diversifying the use of
renewable and abundantly available energy in the country. One
option is ethanol, which is largely made of cassava and is
environmentally friendly, compared with diesel oil and premium.

Jakarta, which is one of the worst cities in the world in
terms of its air pollution, would be a safe and healthy place for
its populace if all car owners used this energy which, at the
commercial price, currently costs Rp 2.400 a liter. The problem
lies in how the government should market this sort of fuel, while
the price is similar to that of premium. To that end, a further
increase of fuel prices is unavoidable, but the government
compensation scheme should be directed to, among other things,
rebuilding thousands of collapsed school buildings throughout the
country -- and letting local people do it -- and letting farmers
grow as much cassava as possible for ethanol. In this way, their
standard of living would be improved.

M. RUSDI, Jakarta