High potential for corruption in Indonesia’s fuel price increase

The Indonesian government officially raised subsidized fuel prices September 3 to rein in the ever-increasing energy subsidies. The price of Pertalite gasoline is raised from IDR 7,650 to IDR 10,000 per liter, and diesel fuel from IDR 5,150 to IDR 6,800 per liter. The government has promised to give cash aid to the poor to cushion the impact.

Long queue at gas station. Photo credit: Ibnu Wibowo

Wibisono Hardjopranoto, professor of Economics at the University of Surabaya (Ubaya), said the increase in subsidized fuel price will have a severe impact on the transportation sector, including maritime, given Indonesia’s status as a maritime hub, which will trickle down to impact consumers. He added that the government must be prepared for more inflation and aid must be given quickly to the poor.

According to Wibisono, the cash aid must be targeted to the poor, given the potential for corruption is enormous.

“Currently, there are many cases of subsidized fuel enjoyed by the middle and upper classes, who are taking about the cash aid from those that really need it, the poor and vulnerable. If possible, the government can consider removing the fuel subsidies and use the fund to help the poor, said Wibisono.

“There is potential for corruption from the central government, to local government to neighborhood leader (RW). At the RW level, there is the added factor of nepotism too.”

Fuel transport truck. Photo credit: Ibnu Wibowo

Ardito, a researcher from a local corruption watch institution, said there are records of nepotism in the screening process to collect data from potential aid recipients. For example, many qualified poor and vulnerable fishermen did not receive cash aid. There were discrepancies between data collected by the local government and the Ministry of Social Affairs too. All these examples were due to preference given to friends and families.

He reminded that during Covid-19, “Don’t forget in the course of the distribution of aid, the Minister of Social Affairs at that time was proven to have stolen IDR 16.2 billion of aid fund. Of course, this was a serious oversight, and the government has to make sure the same thing doesn’t happen again.”

According to Ardito, there were also cases of corruption where subsidized diesel was used for industrial purposes, which is illegal in Indonesia. The price difference is about IDR 10,000 per liter.

Ship passengers with goods. Photo credit: Pelindo

Both Ardito and Wibisono said the government should not only focus on the impact of rising fuel price but also on tackling corruption. Ardito emphasized that corruption will certainly be a burden on the state budget and reminded that the decision to increase subsidized fuel price is to lessen the burden on the state budget.

Chief of the Sidoarjo Police, Commissioner Kusumo Wahyu Bintoro, confirmed that his troops would continue to investigate cases of misuse of subsidized fuel, and to support the government’s policy of giving cash aid to the poor and vulnerable.

“Recently, a few days ago, we arrested a few perpetrators for misusing subsidized fuel. They modified the seat in the car cabin so that it held an additional fuel tank to get more subsidized fuel,” he said.