Understanding fuel subsidy cuts 'a piece of cake'
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.