"We (the consumers) have enjoyed the subsidy for too long. And this is dangerous if the government continues to provide us with it from time to time," Jokowi said.
Jakarta (ANTARA News) - While a group of students in Malang, East Java, staged a protest against his plan, President-elect Joko Widodo said in Karanganyar, Central Java, he will go ahead with the plan to raise fuel oil prices.

He said he was ready to become unpopular with regard to his plan to raise fuel price and to reduce fuel subsidy that had been provided so far by the government and burdened the state budget.

"We (the consumers) have enjoyed the subsidy for too long. And this is dangerous if the government continues to provide us with it from time to time," Joko Widodo, who is better known as Jokowi, said in front of his supporters and volunteers in the Jati Village Hall, Karanganyar District, Central Java, on Friday.

He said that fuel subsidy is a heavy challenge to be faced because it is too big but about 71 percent of the subsidy is enjoyed by people who owned private cars. "The fuel subsidy will be cut and be given to fishermen, farmers, irrigation development, health services and infrastructure facilities," stated Jokowi.

The president-elect who will be installed on October 20, 2014 said that such a subsidy facility will cause people to be consumptive while actually the government should develop productive society not consumptive one.

"In order to improve the welfare of the people we should change the condition. We should no longer carry out imports but exports. If this passes off well, the peoples prosperity will also be improved."

He admitted that heavy tasks will be felt in the first and second year of his government but beginning the third year the outcome will begin to be felt.

Therefore, according to economic analyst Latif Adam of the Indonesian Institute of Sciences (LIPI), the new government must have the gut to raise fuel oil price. However, he suggested that the government should not raise the price this year.

He said that fuel oil price is ideally raised in 2015 when the new government has enough time to prepare supportive programs. The price of fuel oil is impossible to be increased this year because policies and anticipatory efforts to support it had not yet been made.

"The fuel subsidy has become a chronic problem because the amount of funds allocated for subsidy is relatively big," Latif Adam said.

He said that from the economic aspect the price of fuel oil must be increased while the volume of subsidized fuel which burdened the Indonesian economy must be reduced.

The increase in the price of fuel oil will create cost. Cost that could be used to minimize the impact of fuel price hike should be discussed with the House of Representatives (DPR). This because the formulation of anticipatory steps in the face of price hikes has not yet been reflected in the revised 2014 state budget.

Latif predicted that the price increase will contribute 0.9 percent to the inflation rate, if the fuel price is raised by Rp1,000 per liter. If it is raised by Rp3,000 per liter it will contribute about 2 percent to inflation.

"This means that the government can increase price gradually until it reaches a total increase of Rp3,000 per liter or it hikes the price directly to Rp3,000 per liter," he added.

In the meantime, a group of students from the National Students Front (FMN) in Malang, East Java, staged a protest on Friday against President-elects plan to increase subsidized fuel oil price. They held the rally in front of the Malang City Hall.

According to FMN spokesman Fauzul, the government of Jokowi-Jusuf Kalla will not be different from that of the Susilo Bambang Yudhoyono-Boediono pair, which did not take side with the people.

"Jokowi-JK is not consistent with his promise to nationalize the oil and gas sector. In his capacity of the Jakarta governor, Jokowi often boasted to nationalize the oil and gas sector. But after winning the presidential race, Jokowi is even planning to increase fuel oil prices," Fauzul stressed.

He said that the annual potential of Indonesias oil and gas can reach Rp20,000 trillion but the realization in the state budget is only about Rp1,500 trillion. "We are pessimistic with our efforts to cancel fuel oil price increase if we only rely on the roles of officials. Therefore, the people should build strength to thwart the fuel price increase plan," he said.

Nanda Pratama, another demonstrator, said that a cut in the fuel subsidy will only benefit foreign companies. Now, a total of 40 foreign companies have obtained principle licenses to build fuel refilling stations in Indonesia.

He said that each of the company will have right to build 20 thousand refilling stations, which means that some 800 thousands refilling stations owned by foreigners will control Indonesia.

So, Nanda argued, the price increase will further caused difficulties to small people because it will boost prices of other commodities. Now, prices of commodities are high. If the price of subsidized fuel is raised it will further boost other commodity prices and will further burden the people.

According to Rizal Ramli, former chief economic minister during the government of former president Abdurrahman Wahid, there are now 28.2 million poor people in the country based on the Central Bureau of Statistics (BPS) figure. Another 10 million people are almost poor.

Rizal said that if the price of subsidized fuel is raised it will boost commodity prices and inflation rate. "If the next government raised fuel prices, the number of poor people in Indonesia will likely rise to 38 million," the former chief economic minister said.

Apart from that there are still 150 million people who faced economic difficulties due to increase in commodity prices and transportation.

He suggested that the price of oil should not be increased while offering a cross subsidy concept to overcome the subsidy burden.

"We have extended this concept to the Peoples Consultative Assembly (MPR) Chairman Sidarto. He promised to deliver the concept to the president-elect team," Rizal said.

He said if the concept is carried out the government can save up to Rp40 trillion a year.

Rizal Ramli said that some 91.5 million subsidized fuel consumers will face the burden if prices are raised. Of the number, 86.3 million are motorcycle drivers, 2.2 million are fishermen and 3.0 million are owners of public transportation.

Therefore, Rizal conducted a study and concluded that efficient management of fuels from upstream to downstream oil sector could save Rp40 million per annum. Thus, there is no need to increase subsidized fuel prices.

He said that the concept that he was suggesting was producing new type of fuel with reduced octane content. It could cut production cost significantly. The subsidized premium gasoline has 88 percent octane content. But with the new type could be produced with an octane content of between 80 and 83 percent.

"By reducing the octane content, production cost will only reach Rp6,500 per liter. There will still be a profit of Rp1,000 per liter," he said.

In the meantime, the price of Pertamax 92 which contains 92 percent octane can also be increased from Rp12,500 per liter to Rp14,000 per liter. The price of Pertamax Plus which contains 94 percent octane content can also be increased from Rp13,000 to Rp15,000 per liter.

"By raising the price of the two types of fuels, the government will be able to increase state revenues," Rizal added.(*)

Reporter: Andi Abdussalam
Editor: Heru Purwanto
Copyright © ANTARA 2014