Universitas Gadjah Mada
Faculty of Economics and Business

Doubts of the government's fuel subsidy in 2011 and are mainly due to the strong political overtones imaging. The government also tends to be indecisive for the preparation of the elimination strategy of the most optimum fuel subsidy. Even the roadmap of the fuel subsidy reduction has been prepared by the Ministry of Energy and Mineral Resources, The Governement is still away from realizing it. Moreover, the studies recommendations from three university consortium consisting of UGM, UI, and ITB in 2011, are  ignored. Whereas the subsidy control study is the mandate of the decree, article 10 of the  Year 2010 pertaining the State Budget 2011.

"If the problem is imaging, ideally the government inquiry the public about the methods of reduction in fuel subsidies as well as its reallocation of savings " said researchers from the Research and Training of Economics and Business (P2EB), Faculty of Economics and Business (FEB) UGM, Dr. Rimawan Pradiptyo, on Monday (5/3).

In the perspective of Dr. Pradiptyo, it has exceeded the reasonable limits, particularly in 2011. Government subsidy amounting IDR 129,7 trillion in state budget 2011 has reached IDR 160 trillion, but in its realization, it has increased 23.4%. These irregularities occurred due to the wrong concept of that the application of commodity subsidies is not on individual or target group. Consequently the misdirected subsidies  is flowing mostly to wealthy households than poor ones.

"Unfortunately, this halts the government's fuel subsidy for the budget allocated for strategic programs; namely  poverty reduction, infrastructural and regional development," he said.

Motivated by the lack of the government in resolving the issues of fuel subsidies and the importance of knowing the community's response is then shared by Dr. Pradiptyoand other P2EB Faculty researchers, Gumilang Aryo Sahadewo, M.A., on their  study of the reduction of fuel subsidies in the perspective  the household.

The study is the collaboration between P2EB-FEB UGM with the Economy and Environmental Programs for South East Asia (EEPSEA), Canada. The research takes six months time from September 2011 to February 2012.

Dr. Pradiptyo outlines the research conducted using the experimental method, in which 335 non-student community members and non-students are invited to play a simulation game in a computer lab of FEB UGM. The participants come from various members of the experimental community, ranging from housewives, parking-man, drivers, angkringan sellers, to civil servants and private employees.

The research team, said Dr. pradiptyo, is not asking about the 'fuel subsidy reductionprice' but asking the most freaking issue of namely 'the removal of fuel subsidies' to supporter and political imagery doers.

"Of course there is no economic actors who are willing to leave behind fuel subsidies that have been available for years disappear. In the case of the fuel subsidy allocation errors, households are faced with a choice between 'bad' or 'worse'," explained Dr. Pradiptyo, the researcher who actively involve in the research consortium of three university in the year 2011.

The results of experiments carried out show that the policy options mostly acceptable household are gradual elimination of subsidies to reallocate earmarked for the program (specific allocation). On the other hand, the choice of the most unacceptable are the elimination of domestic subsidies for the payment directly with the reallocation of government debt and other government programs (non-specific allocations or non-earmarked).

In addition, people who do not have vehicles, are more 'daring' to take the option to direct the removal of fuel subsidies. This is understandable because for those who do not have a vehicle, the removal of fuel subsidies do not affect them directly. The removal of fuel subsidy scheme is not related to kerosene subsidy, as in 2005 and 2008, so the direct impact to households not owning vehicles tend to be minimum.