Move fast and decisively

The reaction of government officials to the shortage of kerosene across the country these last few days has been ludicrous to say the least.

At first there were futile attempts to disregard the case as unimportant. When it became obvious that the shortage was spreading, the blame was placed solely on hoarders speculating on the government's plan to raise fuel prices by an average of 30 percent.

Then there were efforts to assuage public outrage with "market operations", which in other words meant avoiding the distribution system. No less than the Minister of Energy and Mineral Resources went out of his way to supervise this popular operation in several places far away from Jakarta. And to add insult to injury, an official of Pertamina yesterday offered to reward police if they thwart fuel crime.

Enjoying a monopoly on the distribution of fuel across the country, Pertamina could have easily screened out those who were responsible for hoarding kerosene. But this notorious, money- grabbing company either seems unaware of its controlling power, or condones the hoarding and smuggling of this much needed commodity.

The crux of the problem, however, is not the ineptness of Pertamina.

To provide kerosene in this country, which is home to more than 206 million people, Indonesia has to import crude oil from several sources in the Middle East and elsewhere. At current prices of between $19.70 and $21.10 per barrel, crude oil costs Indonesians between Rp 1,285 and Rp 1,380 a liter. Assuming the cost of transportation plus processing to be around 10 percent, Indonesia should pay at least Rp 1,410 up to Rp 1,520 a liter of processed kerosene, or other kinds of processed fuel.

Selling kerosene in the domestic market at Rp 400 per liter for Pertamina consequently means losing at least Rp 1,000 a liter at current crude oil prices and the current exchange rate. And this loss has been carried by the subsidy, which comes from the government's coffers. The government estimates that this year's consumption of kerosene will amount to around 11.3 million kiloliters, which means the government is losing more than Rp 30 billion every day from this fuel alone.

A similar cost structure applies to diesel oil, sold in Indonesia at Rp 900 per liter, which incurs a similar burden.

The very big difference between local and global prices of fuel clearly exposes this country to many kinds of manipulation. But that is beside the point.

For a country with foreign sovereign debt of more than $73.2 billion plus domestic sovereign debt of no less than Rp 614 trillion (close to $60 billion), that huge burden of fuel subsidies certainly will not be bearable for long. That is the reason behind the government's plan to raise fuel prices by up to 30 percent this year.

However, it is not a popular decision, especially when coupled with huge increases in electricity and telecommunication rates. It is very hard for an ordinary person to accept the fact that, while their income has dwindled in terms of purchasing power for the last three years, they have to bear an additional burden, which they don't think they are responsible for.

The government should act fast and decisively on this matter, to prevent further confusion and manipulation. At the same time, it has to show that this country is still mired in deep crisis. Pretending that it is "business as usual", as it has been doing so far, will certainly not solve the problem.