Over the past few months this year Indonesians were made to feel uneasy
by the government’s discourses to reduce subsidy for oil price.
Many input, suggestions and criticism were given by the public,
including house, and even economists in regard to the government’s plan to
increase oil price. Various models and simulations had been made with the
objective to safe oil subsidy.
However, so far certainty in oil price increase was never arrived at.
From the previous discourse of applying two prices to the present
recommendation to set up one price. This surfaced as president SBY made his
statement to cancel oil price increase. [30/4].
However, president SBY confirmed the option to increase oil prices would
be taken by preparing limited and measurable oil price. According to the
president, the government had to intention to increase price of subsidized oil:
however with the condition of high fiscal burden and high consumption of subsidized
oil price, he government planned to heal then the APBN state budget.
President SBY remarked further that if price of subsidized oil were not
to be increased, he would not make price adjustments to the economically
justifiable oil price. Certainly there would be inflation which would burden to
public.
Amidst global economic recession, president SBY called out all parties
to jointly observe fiscal health and national economic resilience. By reducing
oil subsidy, he believed there was the positive side to it. So if there was
going to be reduced subsidy soon, it would be transferred to fund for people’s
welfare, infra structure building, and to ensure that subsidy was better
targeted.
Based on the president’s statement it might be concluded that the initial
plan to set up two price of subsidized oil was most likely to be cancelled. The
coordinating minister of economy Hatta Rajasa said that gas stations [SPBU]
rejected the plan to apply two prices for premium and diesel [solar] as was
hard to implement. Gas station owners wanted one single price system, and so
was the public opinion.
The recent occurrences led to the conclusion that the public was still
anxiously waiting for the magnitude of the new oil price and when such would be
put in effect. So much energy had been wasted to consider an alternative
strategy. Only trouble was in a matter of weeks the oil price policy being
dissected at the cabinet meeting and internal ministerial meetings suddenly
change course.
Initially the government planned to adopt a two-price policy of
subsidized oil. The first price oil price for motorcycles and public
transportation Rp4, 500 per liter, the same as the present price. The second
price: oil price for private cars which had been increased but still below the
economically proper price of Rp9, 000 per liter
The two price policy was originally due on May 1. That was the reason
why in the past 2 weeks the government had been aggressively publicizing the
plan. Based on the government’s initial calculation the two policy was fairer
compared to increasing price for all consumers.
The reason: oil price increase was only for owners of private cars were
in fact well to do people. But suddenly the government changed their mind: the
one price option was taken, premium and solar price was increased, regardless
of who the persons were. The reason many circles rejected the proposition
because it was not applicable, hard to monitor and deviation prone.
Other reason was the savings made by applying the one-price policy was
much more than by two price policy, i.e. Rp30 – Rp35 trillion against Rp21
trillion. The government’s sudden change upset the public it was announced
suddenly, just a few days before implementation.
And yet business payers mist promptly revises their plan fir business
development by assuming new oil price with all the consequences like inflation
and interest rate. Even bankers had to revise bank’s business plan [RBB] before
end of June 2013 as stipulated by Bank Indonesia. If timing was too tight it
would trouble businesspeople and banks.
The government’s changing attitude about oil pricing reflected the
government’s lack of vision about oil price policy yet oil was a strategic
commodity in the national economy system. If only the government were willing
to listen to people’s voices from the very start in the mass media, they needed
not be trapped in a spin.
By the time the two price policy was announced, many mass media bluntly
reminded that the execution afield would be difficult and tend to trigger
chaos. Other option was to increase price of subsided oil for all consumers to
make it more it more applicable, less risky, and more effective.
As known, oil consumption increased time after time. This year subsidy
realization could swell to 50 million KL of the 46 KL quota if price were not
increased or the volume limited. This means that subsidy fund would blow up
from Rp194 trillion to Rp229 trillion or increasing by around Rp35 trillion.
Certainly Rp35 trillion was a huge amount which would be more beneficial
if used for building infra structure and finance poverty elimination program.
Here is how important it is to prepare a compensation program so the
poor would not be poorer. To keep poor people from suffering more, it was
advisable for the government to prepare social safety net plans especially to
control inflation.
The government must not hesitate to use the find obtained from oil price
increase to finance all the bad consequences of oil price increase, moreover to
consider that the effect would only last for 3 to 6 months. Thereafter,
national economy would turn to normal, or even healthier and stronger.
The longer the governments keep the floating condition of oil price to
hang, the more difficult it would be to manage business. What made things worse
was that prices in the market already soared high. Inflation expectation would
be hoisted up and such was not good for national economy. So the fastest the
price would be made certain the better no matter how bitter it would be for the
small people. (SS)
Business News - May 03,2013
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