Government to maintain fuel subsidy despite free market<\/p>\n
JAKARTA (JP): Minister of Mines and Energy Kuntoro
\nMangkusubroto said on Tuesday the government will continue to
\nsubsidize fuel sales in the domestic market despite
\nliberalization in the country's oil downstream industry.<\/p>\n
He said liberalization of the country's oil downstream sector,
\nas stipulated in the oil and gas bill currently being debated by
\nthe House of Representatives, aimed to create competition among
\nrefinery owners.<\/p>\n
Competition is expected to force refinery owners to boost
\nefficiency and offer competitive prices.<\/p>\n
However, if prices remain unaffordable to the public, the
\ngovernment will continue to provide a subsidy mechanism.<\/p>\n
\"What's wrong with a subsidy if it is for the benefit of the
\npublic? If the House of Representatives want fuel prices in Java
\nsimilar to those in Irian Jaya, we shall achieve it (through
\nsubsidies),\" Kuntoro said.<\/p>\n
Several legislators and analysts have expressed fear the
\nliberalized market system promoted by the bill could disrupt the
\ncountry's fuel distribution and pricing system. Networks have
\nremained stable for decades under the monopoly of state oil and
\ngas company Pertamina.<\/p>\n
They say private fuel producers will prefer to sell their
\nproducts in developed areas such as Java and Sumatra in the
\nintense drive for a profit margin, with Pertamina left to
\ndistribute fuel in unprofitable remote areas.<\/p>\n
If the free market system is consistently implemented, fuel in
\nremote areas will have a much higher cost than in developed
\nareas, due to the transportation cost.<\/p>\n
If such a scenario plays out, people in remote areas could
\nfeel unjustly treated by the government. This in turn may place
\npressures on national stability, the legislators said.<\/p>\n
Several analysts also believe fuel prices will increase up to
\n300 percent if the government introduces a free market system and
\nallows fuel prices to be determined by market forces.<\/p>\n
Kuntoro said the government would maintain its subsidy policy
\nto prevent fuel prices from exorbitantly increasing once the
\ndownstream sector is liberalized and to ensure unified prices
\nacross the country.<\/p>\n
He noted however that the government would only provide
\nsubsidies to help the poor and not \"to cover inefficiencies in
\nPertamina\".<\/p>\n
\"My logic is if Pertamina (refineries, fuel distribution and
\nretail system) is efficient, the government subsidy will be on
\nthe decrease.\"<\/p>\n
The bill, which is set to replace to the 1971 law on
\nPertamina, aims to lift the decade-long monopoly held by
\nPertamina on the country's oil downstream sector.<\/p>\n
Under the bill, the government will also take over Pertamina's
\nright to award oil and gas contracts and regulate and manage oil
\nand gas contractors. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-to-maintain-fuel-subsidy-despite-free-market-1447893297",
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