These policy changes are a tremendous step forward for Indonesia, eliminating and drastically reducing the two largest fossil fuel subsidies. But they do not necessarily spell the end of a subsidy problem Thar the country has been grappling with for over a decade. In recent subsidy reform, the government tohok advantage of a window of opportunity following elections in 2014 and world oil prices falling to their lowest level since 2009 to remove the subsidy on gasoline, and this actually resulted in lower domestic gasoline prices. In 2015, the revised February budget indicated total subsidy costs of under $8 billion. For 2016
, energy subsidies included in the budget are less than $4 billion. The challenge for the future will be sustaining these reforms once political and market conditions change. Moreover, Indonesia still has significant subsidies for electricity and other petroleum fuels in place. Fossil fuel subsidies are, of course, a prominent feature of many Asian economies and not just Indonesia. These can be categorized either as consumer subsidies, benefiting users such as transport and manufacturing industries and electricity generation; and producer subsidies to lower costs for producers involved in the exploration, extraction, or processing of energy products.
The subsidies contribute to fiscal imbalances in many countries and increased operating losses for utilities. Fossil fuel subsidies have other unintended negative consequences. They restrict public expenditure on development priorities such as education, health, and infrastructure; are an expensive means of supporting low-income households; and encourage excessive consumption through low energy prices which increases air pollution and greenhouse gas emissions. The need to reform fossil fuel subsidies is increasingly recognized, with international and national commitments to phase out inefficient subsidies with directional subsidies.
Public subsidies to directional subsidies
Implementation of directional subsidies starting with price adjustment, is the first step into rationalizing the prices in real. The price of real equilibrium, what is meant is the point a meeting between supply and demand. To withdraw gradually, fuel subsidy will appear goods prices rising commodity speculation. But as compensation the price increase, the government allocates funds results from the price increase that the public cannot afford through cash assistance.
While for remote areas using patterns of universal service obligation (USO) Alt prioritize renewable energy, consisting of 3 phases of processing. 1) First phase, people in the region of USO in a drive to make use of renewable energy that is available in its territory for operation or of daily use. 2) Both phases, people use of renewable energy to add value of their activity, their expected will find innovative business model supported resources local existing. 3) Lastly, the community already will contribute towards the country. This pattern of USO has even successfully applied in the telecommunications sector to provide telecommunications services in remote areas.
References
Asian Development Bank. 2016. “Fossil fuel subsidies in Asia: Trends, Impacys and reforms – Integration report”.Mandaluyong City, Philippines: Asian Development.
Widiayanto, Bambang. 2013. “Beralih dari Subsidi Umum menjadi Subsidi Terarah: Pengalaman Indonesia dalam Bidang Subsidi BBM dan Perlindungan Sosial”.Forum Kebijakan Publik Asia. Jakarta.
ISSD. 2014. “Tinjauan Subsidi Energi di Indonesia”.Edisi 1 Vol. 1 . Jakarta.
Nugraheni, Siwi; Hermawan, Yulius; Rakhmindyarto. 2013. “Komitmen Indonesia untuk Pembatasan Subsidi Bahan Bakar Fossil dan Peningkatan Efesiensi Energi di G20”. Jakarta.
