Toward a fair pricing system for fuel oil

Toward a fair pricing system for fuel oil

By Otto Soemarwoto

This is the second of two articles on fuel pricing.

BANDUNG (JP): The higher tax and parking fees, and the
limitation of parking space would work as a disincentive for
using cars in inefficient ways.

This can be further strengthened by giving incentives for
using cars efficiently, the carrot part of the policy. In the
first place public transportation should be improved by making it
clean, safe and comfortable. It should run on dependable time
schedules, with convenient interconnections of buses and trains.

For example, an employee who lives in Bogor, West Java, and
works on Jl. Thamrin would take the train to Gambir Station and
continue his journey by bus, without having to waste time on
connections. Having good public transportation should not be an
impossibility.

Look at the Parahyangan train serving the Bandung-Jakarta
route which is clean, generally on time and profitable. The
government-run DAMRI bus, plying the route of Gambir-Cengkareng
in Jakarta, is another example.

The International Energy Agency reported that in Curitiba,
Brazil, a public mass transport system based entirely on buses
and run by private enterprise proved to be efficient, cheap and
profitable. Good management is the key.

Secondly, schools, universities and offices should be
encouraged to develop a pool system by reducing taxes on cars and
the proposed road tax, or even exempting them from this latter
tax. They would also be given priority parking at reduced prices
or for free.

A third incentive is directed at stimulating walking and
bicycling for short distance journeys by constructing pedestrian
and bicycle lanes which allow safe walking and cycling.

Driving a car for short distances is a very inefficient way of
transportation and causes higher levels of pollution. Walking for
one kilometer and cycling for up to 10 km can be done easily.

Considering that Indonesian cities practice mixed spatial
usage, residential areas are at short distances from offices,
schools, universities, mosques, churches, shops and markets.

Therefore, walking and bicycling has a lot of potential. These
are cheap and clean modes of transportation and are also healthy.

It has been reported that in countries where shopping centers
which have been closed to motorized transport and are open for
pedestrians only, business has increased 71 percent in Austria,
63 percent in Germany and 67 percent in Scandinavia.

Using more bicycles has the added advantage of stimulating the
bicycle industry, which would create jobs for the production of
bicycles and their spare parts, their assembly, trade and
servicing.

Since these economic activities do not require large a capital
outlay and little or no foreign currency, they can further
stimulate small- and medium-sized enterprises.

Even in the U.S., bicycle parts are produced in many small
mom-and-pop shops. Using the ratio of the number of bicycles to
the population of India as an example, and assuming that an owner
would on average use a bicycle for five years and then sell it,
2.5 million bicycles would have to be produced in Indonesia
annually.

Using China and the Netherlands as examples, 11 million and 30
million bicycles, respectively, would have to be produced
annually.

Those working on the streets and at road crossings, and those
affected by parking restrictions, would be able to earn a decent
and healthy living from the bicycle economy.

Clearly, the stimulation of bicycles has the potential of a
large scale economic impact and could actually help to overcome
our economic crisis.

In conclusion cutting the large, but hidden subsidies for the
motorists, and stimulating the people to use fuel oil more
efficiently would have the following impacts:

The government would get additional income from taxes.

The budget for road construction, maintenance and operation
would be reduced.

The fuel oil subsidy would be reduced because fewer people
would drive their own cars, resulting in less congestion, while
more people would use the pool system, public transportation and
walk and cycle.

There would be fewer floods and water shortages.

The air quality would be improved and this would directly lead
to a marked decrease in the huge health costs of air pollution,
and with it people's productivity would increase.

Sixth, the economy would be stimulated whereby numerous jobs
would be created.

The overall impact would be that the ecology and economy would
not be at odds with each other. Instead they would strengthen,
resulting in a better quality of life.

In parallel with improved economy, the fuel oil subsidy could
be gradually reduced and eventually abolished. A fair pricing
system for BBM would be instituted.

This alternative of reducing subsidies would not create social
unrest, as the people, particularly the poor, would enjoy the
benefits.

The dilemma of the BBM subsidy would be resolved by productive
means. The difficulty would be that the poor belong to the silent
mass and do not have any lobbying power -- while the motorists
who would be adversely affected, have access to newspapers, radio
and television, through which they can loudly voice their
discontent and protest. They also have the ability and power to
lobby high level bureaucrats.

The bureaucrats themselves would be reluctant to sacrifice
their comfortable lifestyles. But I hope that President
Abdurrahman Wahid and the legislators will consider this
alternative favorably. The IMF and the World Bank, which have the
power to influence the government, should also study this
alternative in detail and work out a plan of implementation to be
recommended to the government.

The writer is an environmental expert, teaching at Padjadjaran
University in Bandung.