Heaptalk, Jakarta — The Indonesia Government officially increased the prices of subsidized fuel by 30% on Saturday (03/09). The announcement of the updated fuel prices in Indonesia answers the uncertainty over the previously circulated news that fuel prices would be raised on Thursday (01/09). Following this announcement, several polemics occur, especially regarding the impact on transportation fares and other sectors as well as the existence of private gas stations brand that starts to be noticed.
The price of Pertalite with research octane number (RON) 90 was raised to Rp10,000 per liter from Rp7,650 per liter. Solar price rose to Rp6,800 per liter from Rp5,150 per liter. The fuel price hike policy also applies to non-subsidized RON 92 gasoline, Pertamax, from Rp12,500 to Rp 14,500 per liter.
The policy of increasing fuel prices was taken as a response to changes in global oil prices. The fluctuations in global oil prices cause uncertainty and have a significant impact on the State Budget (APBN).
During the virtual press conference on fuel price adjustment (03/09), Minister of Finance, Sri Mulyani, delivered that the Government has budgeted subsidies and compensation for fuel, LPG, and electricity for a total of Rp502.4 trillion, equivalent to US$33.67 billion, an increase of three times from previously Rp152.5 trillion or US$10.22 billion.
The budget is calculated based on the average Indonesian crude price (ICP) which can reach a price of US$105 per barrel with an exchange rate of Rp14,700 per US dollar. The volume of Pertalite is 29 million kiloliters while subsidized solar is 17.44 million kiloliters.
“People are currently asking since the price of oil in the last month has decreased. We continue to calculate the changes. Regardless of the ICP oil price drops to US$90, the subsidy will still be budgeted since the average price of ICP in a year is still at US$98.8 or almost US$99. Even if the price of oil falls below US$90, the overall yearly average ICP in Indonesia is still at US$97,” explained Sri Mulyani (03/09).
The decision for price adjustment is taken based on the fact that more than 70% of the fuel subsidy is actually enjoyed by groups of people who can indeed afford unsubsidized fuel, namely owners of private cars. Whereas state funds should be prioritized to provide subsidies to the underprivileged. Therefore, part of the fuel subsidy will be diverted for more targeted assistance through direct cash assistance (BLT) for fuel.
The total amount of direct cash assistance for fuel is Rp12.4 trillion, equivalent to US$831.1 million, which will be distributed to 20.65 million underprivileged families for Rp150,000 per month. Direct cash assistance will be given for four months and will begin in September 2022 through PT Pos Indonesia. There is also a wage subsidy of Rp9.6 trillion for 16 million workers with a maximum salary of Rp3.5 million per month. Each worker will receive Rp 600,000 per month.
Increase in transportation fares
Rising fuel prices in Indonesia practically affect transportation fares. Both the central and regional governments took further steps to adjust the public transportation fares.
The Minister of Transportation, Budi Karya Sumadi, revealed the steps taken by the Ministry to deal with the impact of rising fuel prices in Indonesia, including adjustments to the tariff for the online motorcycle taxi and economy class public transportation, especially on land transportation modes known as inter-city inter-provincial transportation (AKAP).
Further, the Directorate General of Land Transportation announced the new tariff regulation during the virtual press conference (07/09). There are two components adjusted to the online motorcycle taxi tariff, including the service tariff and app usage tariff.
In zone I and III, there is an increase of 6—10% for the minimum and maximum service tariff, while in zone II the minimum tariff rose 13.33% and the maximum tariff increased by 6% from the previous Ministerial Regulation number KP 548 of 2020. Zone I covers Sumatra, Java (except Jakarta, Bogor, Depok, Tangerang, and Bekasi), and Bali. Zone II includes Jakarta, Bogor, Depok, Tangerang, and Bekasi. Meanwhile zone III spanning Kalimantan, Sulawesi, Nusa Tenggara and its surrounding, Maluku, and Papua. In contrast, the government decreased the maximum app usage tariff by 15% from the previous 20%. The new tariff regulation should be applied three days after the announcement.
For the inter-city inter-provincial transportation of economy class, there is an increase of 32.44% for the minimum tariff and 34.35% for the maximum tariff, which applies to the region I (Sumatra, Java, and Nusa Tenggara) and region II (Kalimantan, Sulawesi, and east Indonesia).
Earlier, the Mayor of Bogor, Bima Arya, issued Mayor Regulation No. 551.2/KEP.280-DISHUB/2022 on the tariff for public transportation services for the small bus type of economy class bus in the Bogor city area (03/09). The tariff regulation is effective from the time it is issued on September 3rd, 2022.
The fares of public transportation called angkot increase by Rp1,500 to Rp2,000 from previously Rp3,000—Rp3,500 to Rp5,000 for public and Rp4,000 for students. The tariff increase applies the same to 25 public transportation routes in Bogor city.
The increase in fuel prices obviously can affect inflation. Deputy Minister of Finance, Suahazil Nazara, delivered that rising fuel prices in Indonesia will drive inflation in September and October during an online interview with CNBC Indonesia (05/09). However, on a month-to-month basis, Suahazil hopes that the inflation pattern will return to normal in November.
Suahazil assumed this inflation commonly occurs quickly in 1—2 months and will normalize in the third month. The Ministry of Finance will continue to monitor the inflation rate until the end of the year to take further steps. Suahazil also said that the government remains optimistic that Indonesia’s economic growth during 2022 will continue in the range of 5.1—5.4%.
Competitive price offered by the private gas stations
Following the increase in fuel prices in Indonesia, people are starting to look at private gas stations that offer attractive prices one of which is PT Vivo Energi Indonesia (Vivo). As a subsidiary of Vitol Group based in Switzerland, the gas station lowered the price especially Revvo 89 (RON 89) to Rp8,900 per liter only after the announcement of the fuel price increase.
The lower RON of Revvo 89 is reasonable to make the price cheaper than Pertalite which has RON 90. The cheaper price of Vivo’s gasoline is preferred and immediately becomes the attention of the public. Not long after, several Vivo gas stations ran out of Revvo 89. Then Vivo issued a new price of Revvo 89 to Rp10,900 (06/09).
In addition, Vivo also offers gasoline with higher RON, namely Revvo 92 (RON 92) priced at Rp15,400 per liter and Revvo 95 (RON 95) priced at Rp16,100 per liter.
Another private gas station headquartered in London, England, Shell, offers gasoline at competitive prices as well. The products spanning Shell Super (RON 92) are priced at Rp15,420—Rp15,750 per liter, Shell V-Power (RON 95) priced at Rp16,130—Rp16,470 per liter, and Shell V-Power Nitro+ (RON 98) priced at Rp16,510 per liter.
There are also solar products namely Shell V-Power Diesel (CN 51) priced at Rp18,310 per liter and Shell Diesel Extra priced at Rp17,990—Rp18,380. Shell Diesel Extra is only available in East Java and North Sumatra.
