RECIPIENT SECTOR RECOMMENDATIONS FOR CERTAIN NATURAL GAS PRICE POLICIES: INPUT-OUTPUT ANALYSIS APPROACH

• Main Author: Swandika M., Juan
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/70856
• Institution: Institut Teknologi Bandung

Since 2020, Indonesia has implemented adjustments to the purchase price of natural gas by setting a Certain Natural Gas Price policy, as a follow-up to what was mandated in Presidential Regulation Number 121 of 2020 concerning Amendments to Presidential Regulation Number 40 of 2016 concerning Natural Gas Price Determination. The policy is aimed to further accelerate economic growth and stimulate domestic industry competitiveness through the usage of natural gas. The Certain Natural Gas Price Policy is intended for natural gas users engaged in the industrial sectors: fertilizers, petrochemicals, oleochemicals, steel, ceramics, glass, rubber gloves, and electricity supply for the public good. The determination of HGBT is carried out by making adjustments to the price of natural gas purchased from the Production Sharing Contract Contractor and/or the tariff for natural gas distribution. One of the adjustment mechanisms is to reduce the revenue of the state share that is taken into account through revenue sharing in line with the Production Sharing Contract of a Working Area in the current year without affecting the revenue of the Contractor's share. Thus, the decline in natural gas prices is expected to reduce the cost structure of natural gas consumer production. However, the Certain Natural Gas Price policy must be applied effectively. Its effectiveness becomes vital due to at least two considerations. First, data acquired suggest that national natural gas production has continued to decline over the last decade. In addition, proven reserves of natural gas also show a substantial depreciation trend. The second concern is the limited share of state revenue based on Production Sharing Contract to compensate for adjustments in natural gas prices. State revenues from natural gas show a tendency that is getting lower in each fiscal year. The aging of Indonesia's natural gas producing fields is one of the factors contributing to the decline in state revenue. Therefore, Certain Natural Gas Prices should be focused on commodities that have a significant natural gas input and generate significant added value for the economy. Through input-output analysis using data from the 2016 Indonesia Input-Output Table and the State of the Labor Force in Indonesia, August 2016 statistics, this research quantifies the linkage effect and the multiplier impact of each of the economy's sectors in order to identify commodities that can be prioritized as recipients of a Certain Natural Gas Price. Specifically, input-output analysis is carried out to measure direct backward linkages, index of the sensitivity of dispersion, output multipliers, household income multipliers, and employment multipliers of each industry that uses natural gas in its production process. Furthermore, it is necessary to rank each industrial sector to obtain a comprehensive comparison between sectors based on the input-output analysis above. The ranking is executed out by applying a simple multi-attribute rating technique using two criteria: (1) its significance over natural gas; and (2) its significance to the economy. The first criterion is measured based on direct backward linkages of natural gas. Meanwhile, the second criterion is broken down into four sub-criteria: index of the sensitivity of dispersion, output multipliers, household income multipliers, and employment multipliers. In this study, a scenario was used in which the two criteria had equal weight. In addition, each sub-criteria on the second criterion also had a similar weight. According to the findings of the analysis, eight different industrial sectors have better socioeconomic indicators compared to all other sectors in the economy that consume natural gas. The eight industrial commodities, namely: fertilizers; electricity; glass and glass products; clay, ceramic and porcelain products; basic chemicals except fertilizers; metal casting products; basic iron and steel; and synthetic resins, plastic materials and synthetic fibers. This study recommends these eight industries as leading sectors that can be designated as recipients of Certain Natural Gas Prices. In addition, it is proposed that the naming of industrial sectors targeted by the policy also needs to be determined with a standard and specific classification so that the targeting of beneficiaries becomes more optimal. Finally, this research is expected to enrich the literature linked to the usage of natural gas and provide trustworthy information for policy makers in the implementation of Certain Natural Gas Prices in the future.