Thursday, 18 December 2014


Vice President Jusuf Kalla stated that oil price might be increased next year if world’s oil price touched USD 110,000 per barrel while today world’s oil price was still at the level of USD 80 per barrel. “If world’s price increased by around USD 10 per barrel, no problem – we need not to increase oil price; but if the increase was more than USD 30 barrel we must recalculate the price.” He said while opening the Risk and Governance Summit 2014 in Jakarta on Tuesday [18/11].

The Vice President’s statement was made after Government’s announcement that price of Premium oil was increased by Rp. 2,000 from Rp. 6,500 per liter to Rp. 8.500 per and Solar oil from Rp. 5,500 per liter to Rp. 7,500 per liter.

The next step for the Government was to consider to implement fixed subsidy on oil. Unlike the present subsidy scheme which was based on price subsidy, soon when world’s oil price fluctuated, the Government did not have to revise oil price, because price of oil would automatically fluctuate following market price and the public would have to bear the excess of caused by increased oil price.

The measure was taken because to increase oil price by Rp2,000 alone was not enough to heathen fiscal. “Next year we would calculate to stipulate fixed subsidy, we will decide whether it would be Rp. 1,000 to Rp. 2,000 per liter” Jusuf Kalla, who felt sure that fixed subsidy could be implemented next year, after firstly consulting the Parliament.

Previously BI felt that to increase price of subsidized oil alone was not enough for stabilizing fiscal. The Government was asked to execute fixed subsidy to support a sustainable state budget. BI’s Deputy Governor Perry Warjiyo saw that axing of energy subsidy by increasing oil price each time there was change in currency exchange rate or world’s oil price increase would but create uncertainty in the future. “So it would be best to set fixed subsidy for oil for example Rp. 500 or Rp. 1,000 per liter – it would be better. If oil price increase is exercised gradually the way it is happening today, it would but create over expectation.” Perry said.

The idea of fixed subsidy itself was in fact already thrown as a discourse in the past Government but was not implemented because it was unpopular. With fixed subsidy, the energy part of APBN State Budget would be sensitive world’s oil price or Rupiah exchange rate value – but the consequence was that price of subsidized oil at retail level might fluctuate anytime adjusting itself to international oil price.

At the same time, Vice President Jusuf Kalla again criticized the previous Government who had wasted high amount of budget for consumptive buying which did not bring any betterment to economy. State budget was thrown away carelessly for routine financing like bureaucracy and subsidy and subsidy which was not ignorable by amount. “The APBN budget had not been functional as instrument to stimulate economy due to wrong expenditure. Fund was wasted on bureaucracy and subsidy” he said. (SS)

Business News - November 21, 2014

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