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This paper is based on a note prepared by Messrs. Ehtisham Ahmad, Luc Leruth, Jim Stevenson, and Piyush Desai, “On Compensation Measures to Protect the Vulnerable from Energy Price Increases,” mimeo, FAD, January 2000. It was also presented at a seminar in Jakarta "Indonesia: Decentralization—the Next Step," in March 2000. The authors would like to thank Mark Baird, Sahala Galol, Bert Hofman, Jiming Ha, Vikram Nehru, Bambang Subianto, Stefano Piperno, Ivan Ruzicka, and seminar participants for very helpful comments and suggestions. The usual disclaimer applies.
There may be a slightly greater than absolute increase in the price faced by the consumer, as some of the other costs are proportional to the base price.
This may not be sufficient to prevent counterfeiting.
A previous experiment with coupons in the 1960s was subject to considerable abuse and leakage.
This may be carried out by bus drivers, who often pay a predetermined rent to bus owners, and have little concern for the long-term viability of the buses.
Note that most angkots use petroleum rather than diesel, and the petroleum prices are not subsidized as much as diesel. Thus, relatively little increases in petroleum prices are needed from a sectoral perspective—though petroleum (given its distributional characteristics and consumption by the rich) could be a good candidate for additional taxation (see Ahmad and Stern, 1990).
Based on one level 3 person at Rp 1.7 million per month in 15 urban areas; one level 2 at Rp 5 million per month and two level 3 at Rp 1.7 million per month each.