The $11 billion question

The $11 billion question

How do you burn Rp 110 trillion (more than US$11.3 billion) in
less than a year? Easy. Keep domestic fuel prices constant, no
matter how far oil prices soar on world markets.

That is the size
of the bill that the government must pay off to subsidize the
owners of gas-guzzling SUVs, industrialists and other users of
fuel in this country if world oil prices stay at an average of
$50 a barrel this year. The bill will soar to Rp 138 trillion
($14 billion) if it averages, as they seem likely to now, $60.
Most of that money will evaporate into thin air with the burning
of the gasoline and other subsidized fuels.

And that appears to be the commitment of this government: Keep
burning. Most of us recall that back in March, after the
government increased domestic fuel prices by 29 percent, the
words that came from the likes of Vice President Jusuf Kalla and
chief economics minister Aburizal Bakrie were "No more fuel price
increases this year." Everybody read their lips and remember it
to this day.

Consistent to this commitment, the government responded to the
latest shortage in premium gasoline this week by ordering the
state oil monopoly Pertamina to increase domestic supplies. At
the same time, the government is contradicting itself by
appealing to the public to conserve the use of fuel, while
doggedly refusing to increase prices as a means of rationing
consumption. No wonder no one is listening.

It is obviously easier for the government to ignore poor
families who are screaming at the high costs of sending their
children to school, or whose children are so malnourished and so
weak they cannot even cry for help. And it is obviously not easy
for the government to ignore the honking and roaring of motorists
complaining about the long lines of cars and motorcycles outside
gas stations in Jakarta and other major urban centers.

The government once again is trying to do the popular thing at
a time when tough and bitter policies are called for. It defies
President Susilo Bambang Yudhoyono's famous, but now almost
forgotten, off-the-cuff remark "I don't care about my
popularity", which he uttered just weeks before raising gasoline
prices in March. Given the soaring cost of the fuel subsidy along
with the increasing world oil prices, now more than ever, the
president should take the bold and unpopular decision to address
the issue.

In the prelude to the March fuel price increase, the
government campaigned hard on the theme that the low-priced
gasoline and diesel for fuel subsidies, then estimated at more
than Rp 60 trillion, was enjoyed mostly by the rich. The more
cars you drive and the more lights you turn on, the more
subsidies you receive from the government. An increase in fuel
prices would cut the subsidy bill and make available huge sums to
spend on helping the poor. This was a compelling argument for
increasing fuel prices earlier this year, and it eventually won
the day after stormy protests from the public, the House of
Representatives and the media. It won because it made perfect
common sense, as bitter as it was a pill to swallow for most
people.

But now, with the subsidy bill hitting Rp 110 trillion, the
government is singing a completely different tune. It is no
longer saying that the huge subsidy given to the rich is morally
indefensible, even as the poor are screaming for assistance in
enrolling their children in school, in getting access to
affordable health treatment, or for the millions out of work, in
getting food on the table. If, as the President said over the
weekend, that corruption is morally wrong, then taking money from
the poor and giving it to the rich, which is what this fuel
subsidy is all about, is just as reprehensible.

The signals the government is sending through its measures in
dealing with the soaring world oil prices is that it wants to do
the popular thing, which is not necessarily the right thing. It
is worth remembering that Megawati Sukarnoputri lost the
presidential election to Susilo last year in spite of freezing
domestic fuel prices throughout 2004. Doing the popular thing
does not guarantee votes. The president should know that.

Does President Susilo have the courage to increase fuel prices
now? That has now become the $11 billion dollar question.