Understanding fuel subsidy cuts 'a piece of cake'

Endy M. Bayuni, Jakarta

More than two weeks after the stiff hikes in domestic fuel prices, many people still don't get the government's rationale for slashing the fuel subsidies, at least, this would appear to be the case if their continued opposition to the increases are anything to go by.

Perhaps an analogy with a piece of cake would help improve their understanding of the issue.

Imagine a family of 10 having to share a cake. What would the best and fairest way to divide it be?

One way would be to cut it into 10 equal slices and thus everyone gets an equal share. Another would be to cut it into different sizes, giving the larger ones to the bigger members of the family as they simply eat more than the rest. Alternatively, the smaller members could get the larger slices as they actually need to eat more.

Either of these three alternatives could qualify as the best and fairest way, depending on the circumstances, and also depending from whose perspective you look at it.

Now substitute the cake with the Rp 140 trillion-something that the government would have had to fork out to subsidize domestic fuel consumption if it had not increased fuel prices by an average of more than 100 percent at the start of the month.

Under the existing system, and still using the cake analogy, the subsidy pie is cut in different sizes, with the wealthy among us inevitably getting the bigger slices as they drive more cars and have larger houses to light up.

The poorer among us get smaller slices as they don't own or even drive a car or motorcycle, and they probably use public transportation infrequently. Those of us in the middle get different sizes, depending on how often we fill up at the gas station, or how frequently we use public transportation.

Is the current system of distributing the cake, which is essentially taxpayers' money, fair and defensible? It's hard to imagine why anyone could defend this system, but there you go. This is democracy where everything is possible.

The fuel subsidy system is morally reprehensible as most of the money, which is essentially public money, goes to people who need help the least.

It's like the fattest members of the family getting the biggest slices of the pie. One could stretch the argument a bit and say that it's like the government playing the opposite of Robin Hood: Taking the money from the poor and giving it to the rich.

In all likelihood, it is this immorality that led to a prominent and popular Muslim preacher to appear in a government ad defending the hefty increases in fuel prices on Oct. 1. Surely it could not have been money or ignorance on his part. Sadly, the preacher succumbed to pressure from the opposition camp for fear of losing his popularity and has since asked that the TV ad be withdrawn.

The increase in fuel prices essentially is an attempt to redress the balance in the way that the government cake is divided in this country.

Even after the increases, the arrangements are still far from being fair.

For this year at any rate, with the fuel subsidies limited by legislation enacted by the House of Representatives to a more "manageable" figure of Rp 89 trillion, the rich among us will continue to get the larger slices of the pie.

But at least, now a slice of the original Rp 140-something trillion of the estimated fuel subsidy pie has been allocated to the poor through the government's direct cash payment scheme. The cut in the fuel subsidies should, at least in theory, free up funds for other far more worthy projects, including health and education in particular, which again will benefit the poor.

Both the government and those who doggedly oppose the increases in fuel prices are, of course, claiming to speak and fight on behalf of the people, and the poor in particular.

While understanding the rationale for slashing the subsidies may be easy, understanding the politics behind the controversy that has blown up in their wake is definitely, excuse the pun, no piece of cake.