Fuel subsidies & poverty

Fuel subsidies & poverty

From Suara Pembaruan

Revoking or maintaining fuel price subsidies is a dilemma. The swelling subsidy costs due to the world crude oil price of US$70/barrel are worrying, because apart from the lack of funds, our oil reserves are only good for about another 15 years.

Indonesia should therefore launch an energy revolution to avoid dependence on oil imports within the next 15 years. This can happen if fuel subsidies are totally abolished so that alternative energy prices become more competitive.

Fuel subsidies have proven incapable of reducing poverty, so that the state budget should be restructured by shifting the Rp120 trillion or more in subsidy payments to such sectors as education and health.

Revocation of the subsidies will initially produce negative effects like rising inflation, but over the long term it will be very positive for economic development. The government plan to raise fuel prices for budget relief should be well directed according to fuel needs and the subsidy shift allocation should be transparent.

Meanwhile, the reasons for the subsidy cut and fuel price increase should be communicated to the public, including non- governmental organizations and students, so that the eventual benefits will be enjoyed by ordinary people and can be understood.

RONALD SURBAKTI