Debate heats up over fuel subsidy

Debate heats up over fuel subsidy

Dadan Wijaksana and Tony Hotland, The Jakarta Post/Jakarta

Renewed debate on whether to retain the hugely costly national
fuel subsidy remerged on Wednesday, following a proposal by the
government to set aside a whopping Rp 63 trillion (some US$7
billion) for the subsidy this year.

The immense cost of the subsidy, which has skyrocketed along
with international oil prices during recent months, and the
opportunity cost of not spending the money in more productive
areas, left a bad taste in the mouth, legislators and businessmen
said.

"The Rp 63 trillion subsidy spending is an awful lot of money.
I can't even imagine how many schools, bridges and roads we could
build (using the fund)," a lawmaker from the House of
Representatives Budget Commission Soekardjo said.

Legislators and government officials have avoided talking
about the increasingly untenable cost of the fuel subsidy
recently, as they feared cutting the subsidy during election year
would create serious social and political unrest.

A government that cuts the subsidy in an election year is also
highly likely to lose.

A lawmaker from the reform faction, Hakam Naja, said he
understood why the government had kept the subsidy, "that had
'multiple domino effects' on the lives of many Indonesians."

"Still, we must find a formula to allow the subsidy to go only
to the intended target, the poor -- something that is not the
case at the moment," he said.

The government on Tuesday revised upward its fuel subsidy
spending for this year to Rp 63 trillion from the initial plan of
Rp 14.5 trillion because of soaring oil prices.

But, critics say most of the subsidy has been enjoyed by motor
vehicle owners who represent the upper income bracket in the
country, while other unscrupulous entrepreneurs profit by
smuggling the subsidized fuel products abroad.

Chairman of the National Economic Recovery Committee (KPEN)
Sofjan Wanandi said the next government should dare to increase
the domestic fuel prices (by cutting the subsidy), except for
kerosene, which is largely consumed by poor people.

"The government must review whether the subsidy has really
touched the ordinary people or whether it has mostly benefited
certain people, such as those who smuggle oil abroad.

"I'm just afraid that one day, we won't have money left to
maintain existing development projects, let alone increase them,"
he asserted.

Top businessman and former chairman of the Indonesian Chamber
of Commerce and Industry Aburizal Bakrie said it was timely for
the government to find a way to ensure only the poor enjoyed the
fuel subsidy.

Aburizal said it was an urgent priority for the next
government to create an domestic energy policy that made use of
the country's abundant gas and coal reserves.

"It's about time we start using gas as an alternative. We can
still export the oil, and we can use gas for domestic
consumption," Aburizal said.