Thursday, March 22, 2012

It's not really about deficit

So as usual, KKG is again spreading his attack against the plan to cut fuel subsidy. Politicians like Dyah Pitaloka happily embrace his elaborate take and broadcast it all over. Their argument is, the current budget deficit is not as bad as the government claims, will not explode, and there should be enough money to keep subsidizing the fuel consumption.

Which misses the point. Look, even if we have a budget surplus, the current fuel subsidy is still wrong. This is not about deficit big or small - or even (very unlikely) surplus. This is about misallocation, mistargeting, and misincentive. The budget is misallocated because the money spent to cover the subsidy would have been in better use if otherwise spent on infrastructure development. The subsidy is mistargeted, for the major bulk of it is enjoyed by the top rich. And the subsidy system is suppressing the incentive for the development of renewables, for the environmentally-friendly energy products will not be able to beat the price of the heavily subsidized gasoline.

In short, the current fuel subsidy practice is unproductive, pro-rich, and environmentally harmful. Too bad, the government is also focusing the debate too much on the deficit issue.


  1. True, it's not about deficit, but our President used that argument, which was why KKG and RDP responded that way.

    The development of other sources of energy is supposed to be a very important reason for the fuel price raise. That's why our CPO and Coal industries experience boost these several years. Indonesia must also start to develop our nuclear power plants, which is a source of cheap power. We need cheap power to survive the competition.

    And BLT is pretty much the same like fuel subsidy. With our current score on corruption, there will be misallocation of BLT.

    I propose to keep things the way they are right now, with one thing to change: our corruption score.

  2. Dan pemotongan subsidi bbm untuk infrastruktur? Hahaha..bego.. Ada sih 10 T utk dana infrastruktur desa. Tapi, tahukah kamu kalau itu nanti akan digunakan sbg money politicss dengan dibagi2kan 250 juta perdesa? Ituloh mirip2 yg diusulkan Golkar satu dua thn lalu. Plis deh..