TEMPO.CO, Jakarta - President Joko Widodo's one price policy for fuel in Papua is an initiative that needs to be firmly controlled so it does not get out of hand. Since Indonesia's independence, people in Papua have never paid the same price for fuel as those in Java. Gasoline is 14 times more expensive than the official government price.
By imposing one price effective retroactively to August 17, Jokowi's initiative fulfils one of his campaign promises. After 71 years of independence, we now have a president who cares about needs of Papuans, specifically in obtaining fuel. But this could spin out of control because Pertamina will have to bear all the losses in enforcing this same price.
Pertamina stands to lose an estimated Rp800 billion every year subsidizing the cost of transporting fuel to Papua. It has had to buy two aircraft with a capacity of 5,000 liters to transport fuel to distributors. There is now an agent in every regency of the province. The main reason for the high price of fuel in Papua is the long distribution chain. This is why gasoline that costs only Rp6,450 per liter in Java soars to Rp50,000 to Rp100,000 per liter there.
Besides distribution, the other problem in Papua is hoarding. People with enough money buy fuel from agents at the government price then hoard it until scarcity drives up the price. The Papuans can do absolutely nothing about this shameful practice.
Therefore the one fuel price policy is not only concerned with subsidies, but also with oversight and law enforcement.
There will be a price to pay. Material loses arising from Jokowi's policy could be much higher than Rp800 billion. The question is how long can this policy to provide subsidies for Papua continue? It is not only in Papua that fuel prices are higher than in Java. In Maluku and North Kalimantan, the same problem exists. If the president's instruction is not the same for other areas, social justice, the basis for this policy, will actually lead to inequalities. In other words the 'one price policy' will lead to subsidies increasing and spreading, because the government must not favor Papua.
Like other initiatives, this policy should be temporary. At the same time, the government needs a long-term policy to push for fuel diversification. Papua could be the first location for a large scale alternative energy program. The large allocation of funds for subsidies must be used to meet this need.
Lower fuel prices will lead to an increase in consumption in Papua. Development will accelerate because fuel will drive the construction of infrastructure and will grease the wheels of the economy. Pertamina must supply much more fuel as reserves are low and falling.
By developing alternative energy sources, the government would achieve two aims simultaneously: diversification of energy and diversification of consumption. The problem is that if it is not started now, renewable energy will continue to remain an unrealized concept. Jokowi will be remembered as a president who laid the foundations for this policy, not just a person who talked about populist policies that went nowhere. (*)
Read the full story in this week's edition of Tempo English Magazine