Josua Gantan, Atambua, East Nusa Tenggara – At a state-owned gas station in an Indonesian border town in Timor's Belu district, a liter of premium fuel on Sunday went for Rp 6,500 ($0.57) – less than half of the price at the pump in poverty stricken East Timor, just a few kilometers away, where the government does not provide generous subsidies.

The vast price disparity has long stoked a bull market for fuel smugglers, at great cost to a government already strapped for cash under the heavy burden of subsidy costs.

Last year, President Susilo Bambang Yudhoyono was forced to raise fuel prices to keep the budget deficit below the 3 percent threshold. This year's widening deficit owes itself to a projected increase in subsidies to Rp 285 trillion ($25 billion) from an initial estimate of Rp 210.7 trillion – more than 15 percent of the total budget.

Over the weekend, the Jakarta Globe witnessed in action what were almost certainly smugglers at work.

While over one hundred people waited in line to fill their tanks, people on motorcycles were able to ride up, cut the line with impunity, refuel, ride off, and return after a short while to refuel again, making small payments to the gas station attendants each time.

The practice was not isolated. A source familiar with the illicit transactions, who spoke on condition of anonymity, told the Globe that the practice was widespread at Pertamina stations all along the East Timor border.

In April, the military thwarted a plot to smuggle 3,200 tons of fuel across the border. Small-scale smuggling, however, accounted for much of the overall illicit trade.

A barrel of fuel, which would cost some Rp 900,000 in Indonesia, could be sold for as much as the equivalent of Rp 1.8 million in East Timor, the source said. He said premium grade fuel, the least expensive option in Indonesia, was not widely available in East Timor.

Smugglers used enlarged gas tanks on their motorbikes to ferry the fuel to barrels, which they brought across the border through official entryways or backchannels, he said.

He said gas stations near the border sometimes went through four tanker trucks worth of fuel in a single day due to the prevalence of smuggling. For many in Belu, where the majority earn their living from farming, fishing or livestock, subsidized fuel is a source of liquid money.

The border attracts other illicit activities as well, including a steady stream of stolen cars, the source said. Cars stolen across Indonesia find their way to the border, he said, where fences resell them at a fraction of their original worth. A 2013 Toyota Avanza Veloz, he said could be bought for as little as Rp 75 million on the border.

He said fences waited along the border for for sellers, mostly from Java, to show up and arrange deals. "Everyone gets their share," he said, without elaborating further.

Indonesia has struggled for years to stop the flow of fuel and other illegal goods from East Nusa Tenggara into East Timor, but the trade remains strong. Belu district juts far to the east, with one area surrounded on three sides by East Timor, making illegal trade there particularly difficult to stanch.

Source: http://www.thejakartaglobe.com/news/timor-fuel-smugglers-deal-liquid-money/