Indonesia’s Fuel Dilemma

Indonesia has the big problem in handling the state budget, especially relating with the big scale of subsidized fuel spending. With cost for subsidized fuel reaching more than  Rp250 trillion or around US$23  billion, Indonesian government loose opportunity for building  more important projects,   like infrastructure, education, and housing.

As the emerging market, Indonesia has gross domestic product nearly USD1 trillion with earning per capita around US$3 thousand per year. Indonesian people have new style of life with more money for shopping and traveling then before.

More people buy cars or motorcycles thank to easily credit facilities from lender like banks and others financial institutions. The selling figures of cars, motorcycles, buses and trucks have been rising fantastically. In 2000, automotive industries sold 18,9 million unit, then risen up to 76,9 millions unit    in 2011.

The amount vehicles are consuming very much fuel (premium and diesel fuel) which receive subsidy by government.  This year (2012), people consume fuel  45, 3 million kiloliter. Next year, Indonesia will need more million kiloliter  fuel  in condition with more vehicles will be sold. Automotive industries in Indonesia have new target for breaking vehicles selling record to 1 million units a year.

Indonesia is oil producer for nearly 1 million barrel per day. However, it is not enough for covering total of domestic oil consumption. Indonesia need import crude oil from other countries and it made the country had been a net importer of energy.         

Indonesia Statistic Body said crude oil import for October this year up to US$1,073 millions. It rises 38 percent compared with last figure of US$779 million. Oil import has been negative impact for rising current account deficit to US$1, 55 billion in October.

Money for subsidized fuel should be used for building public projects like housing, transportations and constructing bridges and road. One side, Indonesia spend too much money for oil subsidized, in other hand government has lack of budget for building infrastructures.

Now day, gasoline price in Indonesia is lowest in the South Asia nations. For one liter need cost only around fifty cent US dollar. Then, gasoline smuggling is the big problem especially in border area. Government says it is difficult combating smuggler in condition with very low price of gasoline.

The government had send proposal to legislative body for rising gasoline price around 30 percent since last year, but most parties did not like the idea. The new price would save money about USD6 billion that could build road 3 thousand kilo meter or millions house for poor people.

Rising fuel price policy is very sensitive and politically not easy for representative member to decide. Indonesia had rise fuel price many times and always followed by protest of university student in several big cities.

Two years before vote pooling for legislative and presidency (2014), no parties will take a risk with launching the unpopular policy. Ruling parties in coalition: Demokrat, Golkar, PPP, PKB, PKS are not very interested to rise fuel price. They tend to choosing safety road with adding budget for subsidized fuel.

The very low fuel price is risky policy in a long term, not only with mathematical budget neither in social habit. People tend to consume fuel with inappropriate manner. One family has more than one motorcycles and people are not interested to walking even for just hundreds meters. More students without driving license are riding motorcycle, followed by hiking incidences and victims, including death cases.

Government has good transportation policies but can't be implemented easily. Mass-rapid transportation program had been launched decades ago by government with no development in real field.  Projects faced many obstacles notably land releasing.

(Rihad Wiranto-personal opinion)