Jakarta – The government’s recent increase in fuel prices is the right momentum to optimise the transition of fossil energy to new and renewable energy (NRE), analysts said Sunday (4/9).
Prof. Imron Cotan, who is also a former Indonesian ambassador to Australia and China, said that so far about 20 percent of the state budget has been locked for the provision of fuel subsidies. According to him, this is not healthy because the distribution is not right on target, so “the subsidy must be refined immediately so that the state budget is not pressured. If this is not done immediately, the budget adequacy will run out in September.”
Previously, the government announced at 14.30 WIB (0730 GMT) on Saturday, September 3, 2022, the price of pertalite would increase from Rp. 7,650/litre to Rp. 10,000/litre, subsidised diesel fuel from Rp. 5,150/litre to Rp. 6,800/litre, and Pertamax non-subsidized from Rp. 12,500/litre to Rp. 14,500/litre.
Cotan said the supply of fossil-based energy is very limited, and carbon dioxide emissions actually have a bad impact on the environment. He also reminded the government’s international commitment to reduce carbon emissions by up to 30 percent. This commitment will be difficult to realise if the state budget continues to be locked only to provide fuel subsidies.
Therefore, the increase in fuel prices has become a strategic momentum to divert or at least mix it with renewable energy. According to him, Indonesia has the potential for abundant use of renewable energy, so fuel price adjustments need to be made in order to achieve efficiency in the state budget.
Meanwhile, the Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa revealed that the price of crude oil is only one parameter in determining the amount of subsidies. The movement of the rupiah exchange rate and consumption are other parameters in the calculation of subsidies.
He said the low subsidised fuel price contributes to waste and provides an example of high mobilisation using private cars, instead of using public transportation. “The subsidised price stimulates excessive consumption,” said Tumiwa.
This excessive use has an impact on the dying supply of subsidised fuel. The Pertalite and diesel fuel subsidy quota is estimated to only be sufficient until mid-October 2022, if there are no restrictions.
PT Pertamina Patra Niaga, a subsidiary of PT Pertamina (Persero) noted that the quota for Pertalite type fuel was 3.55 million kilo litres (kl) until the end of August 2022 from the set this year at 23.05 million kl.
With these conditions, the government also plans to increase the quota, especially for the addition of Pertalite to reach around 5 to 6 million kl. Meanwhile, the additional quota for subsidised solar reached 2 million kl.
Tumiwa added that the price disparity between subsidised and non-subsidized fuel could also continue to undermine the fuel quota. Buyers will switch to using cheap fuel if the price disparity is too big. This condition will make consumption prone to collapse and subsidies to swell because usage continues to increase. (Hartatik)
