DEN: State could save Rp200 trillion by eliminating inclusion error

Jakarta - National Energy Council (DEN) member M Fadhil Hasan stated that if the state can eliminate the “inclusion error” in fuel oil (BBM) subsidies, it could save Rp170 trillion to Rp200 trillion. “The funds could then be used for social protection, as well as other programmes,” Fadhil said in Jakarta on Thursday.

According to him, the problem faced in the current subsidy scheme is an inclusion error, where people who are not entitled actually receive far greater benefits than those who are entitled. Fadhil said that the latest report, for example, states that the top 10 per cent of the wealthiest people enjoy subsidies of Rp2.5 million per capita per year.

“But the poorest 10 per cent only receive benefits of Rp50,000 per capita per year from the current subsidies and compensation being implemented,” he said. He added that the richest 20 per cent of society also enjoy more than 50 per cent of the benefits from the current subsidy and compensation scheme. “And that is an injustice, where subsidies that were originally intended to provide protection to the poor or underprivileged are instead enjoyed by the rich,” Fadhil said.

“If we can eliminate the inclusion error in subsidies and compensation, we can save, according to our estimates, around Rp170–200 trillion,” he said. He added that the task of the government and the DPR is to push for this inclusion error to be eliminated, or significantly reduced if it cannot be completely removed. “I think we must implement a closed subsidy scheme or integrate it with the latest socio-economic data,” he said.