Tuesday, 11 December 2012


Sustainable fiscal or budget health to a country is a necessary condition, and therefore it must be attempted as optimally as possible. If not, its negative impact will spread everywhere.

The Indonesian government is currently facing a crucial problem, namely how sustainability of a healthy budget can be achieved and maintained year by year. Formerly, the government is planning to increase electricity tariff (TTL) by 15 percent in 2013.

When the plan was disclosed, it stimulated a polemic in the society. The business community has objection against TTL increase because it will have a direct effect on industry sustainability. For example, textile and textile product (TPT) entrepreneurs whose dependence on electricity consumption is quite high.

Therefore, there is another perception that government should better increase price of subsidized oil fuel (BBM) rather than increasing TTL by 15 percent in 2013. TPT entrepreneurs have asked the government to increase price of subsidized BBM as increase of electricity tariff will cause increase in production cost. So far, fiber spinning industry has been using a very high amount of electricity energy.

In addition to facing high electricity tariff, TPT industry also suffers from the consequence of the enforcement of Regulation of Finance Minister No. 253/2011. Performance of national TPT industry in 2013 will decline due to the crisis in the United States and Europe.  And, TPT sector is also facing Regulation of Finance Minister No. 253/2011 on Import Duty Draw Back on import duty that has been paid for import of goods and materials to be processed, assembled or installed on other goods to be exported.

In line with the above demand, TPT industry operators also firmly refuse TTL increase is very discriminative as users of electricity with a capacity of 900 watt or less are not imposed with price increase. TPT entrepreneurs will file a judicial review to the Constitutional Council regarding high tariff.

According to them, high electricity tariff will cause TPT export performance to decline. Increase in TTL makes Indonesian TPT industry to be more sluggish. This year, its export performance has declined by 6 percent, and next year it is predicted to be lower than the realization in 2012.

On the other hand, the government reasoned that allocation of subsidized BBM will continue to increase each year as number of vehicles increases continuously. This is because number of vehicles produced always increases. Old vehicles are still being used, and these vehicles use subsidized BBM.

For this year, the government has filled a request for addition of quota subsidized BBM at 4 million kilolitre (kl), and the previous quota is 40 million kl. While, assumption of quota for subsidized BBM in the State Budget Plan (RAPBN) of 2013 is set at 46.1 million kl.

Therefore, the plan on addition of quota of subsidized BBM submitted by the government to the House of Representatives is already suitable for the current condition. An addition of two million kilolitre a year seems quite realistic. Based on data of projection of Indonesian Automotive Industries Association (Gaikindo), there will be an additional 10 million units of motorcycles in 2013. While, number of cars will increase by one million units.

In relation to allocation of subsidized BBM in RAPBN 2013 at 46.1 million kl, the government admitted that quota for subsidized BBM has been reduced by saving conducted by the government. The government is in the opinion that if there is no saving, subsidized BBM needed in 2013 is estimated to reach 48 million kl. Therefore, BBM efficiency and saving is still carried out by the government. But, it is admitted that the attempt is not yet optimal.

Saving movement implemented by the government is by prohibiting government official vehicles and transport vehicles for mining and plantation from using subsidized BBM. There is also saving program in the State Electricity Company (PLN) which requires not to use BBM in electricity production.

And, the cause of the decline in subsidized BBM allocated in 2012 is because the government does not increase prices, while price of non- subsidized BBM continues to increase. Facts show that vehicle owner who previously used Pertamax (non- subsidized BBM), and as Pertamax? Is price increased, they shifted to premium gasoline (subsidized BBM). Consequently, number of users of subsidized BBM rises sharply.

There is many smuggling of subsidized BBM. The reason is the increasing difference between price of subsidized BBM and price of non- subsidized BBM. Many of BBM smugglers are increasingly fearless. The government should cooperate with the police in taking actions against the smugglers.

The House of Representatives also stated that increase of quota for subsidized BBM has been an issue that needs immediate attention. Moreover, based on data of PT Pertamina (Persero), as of August 30, 2012 total allocation of subsidized BBM reaches 29.32 million kl consisting of premium gasoline at 18.44 million kl, diesel fuel 10.06 million kl, and kerosene 700.00 kl.

From the above illustration, the government is really facing a dilemma. The budget saving alternative bring a consequence of declining political reputation. But, if the government is able to communicate it properly and smartly about the  background, intention, and objective of budget saving , whether by increasing TTL by 15 percent or by increasing price of subsidized BBM, the public can accept it.

The problem is that government seemed to worry that the unpopular policy will decrease governments ? S reputation. While, in fact, if the medium and long term goals of the saving can be communicated smartly, the government will receive appreciation in the future. The government assumed that the public will not agree with plan on increase of price of subsidized BBM. Therefore, the government chooses to increase TTL by 15 percent starting next year.

The policy on increase of TTL by 15 percent starting next year has been stipulated. If this has been decided, the government must be able to secure the policy so that its implementation can be monitored. Any weakness must immediately be corrected. Hopefully, there will be no mass riot so that policy can be implemented with discipline and full commitment. 

Business News - September 21, 2012

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