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Expert eases worries over Jakarta's fuel tax increase

Jakarta Globe - January 29, 2024

Alfida Rizky Febrianna, Jakarta – The Jakarta City Administration has doubled the Motor Vehicle Fuel Tax (PBBKB) from 5 percent to 10 percent, but according to an expert, the increase is not expected to have a significant impact.

Ali Ahmudi Achyak, the Executive Director of the Center for Energy Security Studies (CESS), said that the cost of non-subsidized fuel might go up in tandem with the increasing tax.

"There will indeed be an increase in non-subsidized fuel, particularly at gas stations in the Jakarta area but it won't reach Rp 1,000 (6.3 cents)," he said on Sunday.

Ali said that this increase would not have any impact on subsidized fuel, also known as Pertalite, as it has already been factored into the production and distribution cost.

However, Ali warns that the rise in non-subsidized fuel prices may prompt users to shift towards subsidized options. In such a scenario, the tax increase could escalate the subsidy burden on the state budget.

"This is what we should be concerned about. Ultimately, there will be an increase in the consumption of subsidized fuel, causing an increase in subsidy costs. This is because of the psychological aspect of non-subsidized fuel users who feel that the price will rise, and then immediately switch to subsidized fuel. This needs to be anticipated," he said.

The current price of non-subsidized fuel in DKI Jakarta for Pertamax is Rp 12,950 per liter as of January 28. Following the adjustment, the price is expected to rise by Rp 647 to Rp 13,597 per liter.

"Economically, it doesn't pose a substantial impact. The significant impact is psychological. Upon hearing the word 'increase,' people tend to get worried. Queues at gas stations sometimes form even when news of a fuel price hike that hasn't occurred yet circulates. It's a psychological issue," he said.

Ali recommends that the government openly communicates the escalated fuel prices, avoiding raw percentage calculations. Furthermore, he encourages the government to offer clear explanations for the price hike to the public.

Source: https://jakartaglobe.id/business/expert-eases-worries-over-jakartas-fuel-tax-increas