Abstract

Relieving the soceity economical burden is one of the most mandatory duty of government.
Fuel subsidize, the way to decrease citizen expenses as well as the initial purpose has been
designed since the government of Suharto. Today, this phenomenal Indonesian government
policy is being a hot issue to be debated. Most of people questioning whether or not the
program exactly hit its initial goal and the way it is not suitable with todays circumstances.
This paper would be talking about the authors thoughts, critical point and opinions on how
fuel subisidize program is not necessary to be implemented due to the economic state burden,
political point of view, and Indonesias energy state consideration. In this paper the author
will also give arguments about the danger if Indonesian government continues providing
subsidies and its further impacts.

Introduction
Coming up in the last 1970s, fuel subsidize is being a very great program. At that time,
Indonesia reached the peak oil production and still become an OPEC member. High inland
revenues from oil production, exports, low fuel consumption society, and strong economical
state are the reasons why government finally hold that kind of subsidy. Subsidy is determined
as the financial assistance given to the economic sector which comes from the government
for some economical stability purposes. In this case, fuel subsidize is given to Solar and
Premium so that the price can be lower when people can easily afford. This subsidize is
proposed for the lower-middle society.
The subsidy still looks reasonable as a form of compensation at that state, so that people can
simply take the profits from selling out of Indonesian crude oil abroad. But the question is
that todays state is too much different. The impact of fuel subsidize on the state budget
provision in terms of past and present circumstances are very different. Data from the
publicity team of PT. Pertamina since the end of 2005 showed that the annual fuel
consumption increased approximately by 4%. Increased of fuel consumption is actually
inversely proportional to the amount of domestic oil production that continuously declining.
Thus, the government requires to add more funds to import fuel in larger quantities. Of
course, the subsidy policy is increasingly onerous for Indonesian government.

Discussion
Endanger Indonesian National Budget
Until now, fuel subsidize has reached about 20% of the total amount of subsidy whereas the
others have an average only 10%. Data obtained from Briefing Subsidi Energi Indonesia,
funds for subsidy in 2014 reached 194,893.1 trillion rupiahs.
Value of 194 trillion subsidies may not make Indonesias economic state turning chaos. But
the power of today's fuel consumption which extremely increasing, even enlarge the
possibilities of happening the worst. Reflecting to the past, there has never been a history of
fuel consumption in Indonesia has declined. Inexpensive price and easily access to get
subsidized fuel makes fuel consumption growing up rapidly nowadays. Let us imagine if
every year the consumption of subsidized fuel continue to multiply, how are Indonesian
national budget? How about Indonesian Foreign Debts?
Bank Indonesia (BI) reports the position of Foreign Debt (FD) Indonesia at the end of June
2014 stood at 284.9 billion US dollars. The foreign debt position increased by 8.6 billion US
dollars, or 3.1 percent compared to the end of the first quarter of 2014 amounted to 276.3
billion US dollars. The increasing of the debts could not be separated from the effects of this
misdirected subsidy policy. The soaring of fuel subsidize continues to lead the state budget
revenues could not pay the debt, then ironically we must also pay the interest by owed.
Furthermore, the issue of fuel subsidize has also brings negative impact on the value of the
rupiah against the US dollar (US).
Misdirected Policies
This policy seems not only to be very harmful to the state budget, but its implementation is
also given rise to problems and not hit exactly on target. One of these targets was very large
resulting to the state losses. Fuel subsidize that should be enjoyed only by those on lower
incomes are now even be enjoyed by almost all the upper middle class. Data from BPH
Migas, 2013, the number of people using fuel subsidize by 45% is used by the middle to
lower class while the rest is used by the upper class people.
Perhaps many people think that the solution is subjected to control fuel only for middle to
lower class people, but in fact for many years the government has not been able to control the
target of the subsidy. This is happen because the system which organize that cars or other
luxury vehicles may not use Premium are not well established throughout Indonesia, while to
fix it all would require socialization and a long enough time. Todays fuel consumption is
continue to soar, Indonesia can not wait for it because it would potentially create a state

budget swelling. This circumstances shows that the solution is not an effective way to control
fuel consumption. Will this situation when so many upper class people misspend the money
state allowed to continue?
Fuel Subsidize is not In Line with Energy-Saving Program as a Result of Energy State
Consideration
Data from Ministry of Energy and Mineral Resources reveals that the number of Indonesia's
oil reserves is only 7,764.48 MMSTB. The number is approximately running out within 10 or
15 years in the future. The data obtained makes the government initiated to make an energysaving program. Moreover, when the lifting of Indonesian oil production is only in the range
of 800-850 thousand barrels per day whereas the domestic demand turns into 1.5 million
barrels per day. The effort of promoting energy-saving program increased since the
government was forced to import 600-700 thousand barrels oil per day to fulfill all the
domestic needs.
Catur Dharma Energi, one of Indonesian government program concerned of energy-saving
finally emerged. Of course, the policy of fuel subsidize should be re-examined due to that
program emergence. The fuel subsidize policy is not in line with that kind of program. The
price of subsidized fuel which is relatively cheap makes public accustomed extravagantly to
the fuel consumption. So, it is very terrible when government still support the existence of the
fuel subsidize policy. Let us imagine. Fossil fuels, unrenewable energy, only in a limited
amount, and fuel subsidize seems make the society feeling greedy to consume. Is it worth if
the government knows that it will bring the worst but they still let the society dangerously
slather the fuel?
PT. Pertamina said the power of fuel consumption leads a fear if the subsidized fuel stock will
not meet until December 31, 2014. It becomes a worry if this continues then Indonesia really
need to add more funds, incur debt, or reduce subsidies to other sectors.
Fuel Subsidize in Terms of Political Aspect
The emergence of fuel subsidize policy is also not spared from the political economy point of
view. During the government of Suharto until now people have been too long accustomed to
enjoy the subsidy. This makes the further regime turns into a giddy for subsidy removal.
Policies to revoke subsidies assessed both unpopular and unpro-citizen policies. So in this
case, the policy on fuel subsidize in fact just influenced by the political interests of certain
parties (especially the ruling regime). As a result, the fuel subsidize policy actually just

became a weapon instead to gain the sympathy of people. This condition makes the
government was forced to make loans to the international loan sharks. Government debts are
intended to finance operating needs in the form of subsidies. Well, it seems like we can make
a parable that there is a family which owed to eat, but not at all healthy from an economic
standpoint. Again, the danger of national budget swelling would re-emerge due to the fuel
subsidize policy which only became a political weapon without considering the economic
side. Therefore, it is a paradox if on the one hand people against toward the fuel subsidize
removal, but on the other hand complained about the growing of national debt.
Widespread Fuel Smuggling due to Fuel Subsidize
Smuggling cases related to foreign fuel smuggling is now rife. This actually could have been
prevented if government revokes fuel subsidize policy and sell it as well as the standard price.
Smuggling happens when the price is lower than it should be. Today, the subsidized fuel
domestic price is very cheap compared to the price of fuel in other countries, so that the
perpetrators will easily take the profits by selling them abroad. According to the Head of SubSection of the Office of Internal Compliance and Guidance Control and Customs Service
(KPPBC) Primary Type Atapupu, in East Timor, subsidized fuel price can reach the range of
10 thousand to 15 thousand rupiah per liter. Similarly, not too much different with Singapore
and Malaysia which in the range of 13 thousand to 16 thousand rupiah per liter. Thus,
although reduced by transportation and a complex bureaucracy costs, the actors still get a
considerable profit. The cases of fuel smuggling not only occur occasionally. Early on the last
June, Customs of Tanjung Balai Karimun have foiled an smuggling attempt of 60,000 metric
tons of crude oil. In fact, according to the data accumulated from the Ministry of Economy in
cooperation with Customs, smuggled state losses soaring at Rp. 200 billion per year. It is not
only harmful to the economy, but it can be directly perceived by the society, because the
rations were "stolen" will definitely affected to the government imagery. In addition, the fuel
that massively smuggled also resulting fuel shortages in some rural areas. For example in
Atambua, gas stations is usually out of stock only in12 hours. This will obviously lead to
more complex problems if not directly addressed. When the government decided to lift the
price of subsidized fuel, then the difference between the price will shrink, this will make the
perpetrators think twice to smuggle the fuel from Indonesia.
Conclusion

Government, the only one who made the authorities and regimes for the future of a country.
Fuel subsidize, not only unnecessary policy but also make this country turns into chaos.
Based on the discussion, the fuel subsidize will only endanger the national budget, a weapon
imagery misdirected policy, and a burdensome troublemaker. The author thought that this
kind of policy is not necessary to be applied due to the economy, politic, and even energy
state consideration. It will bring more benefits when government revokes the policy and and
substitute for another sector budget instead rather than still support the fuel subsidize
existence.