Govt to tender subsidized fuel<\/p>\n
Fitri Wulandari, Jakarta<\/p>\n
Snaking lines of people purchasing subsidized kerosene may be
\na less common sight in the future as state oil and gas company
\nPertamina loses its monopoly over the distribution of the fuel.<\/p>\n
The government will open up the oil and gas downstream sector
\nto competition next year. Part of the plan is to hold a tender to
\nselect companies that will supply subsidized fuel products in the
\ncountry.<\/p>\n
Erie Soedarmo, director of the oil and gas business at the
\nMinistry of Energy and Mineral Resources, said the current system
\nwhere the government controlled the fuel supply via Pertamina was
\nvulnerable to supply disruptions.<\/p>\n
\"There is a danger in relying only on one source. When
\nsomething happens to Pertamina, it immediately affects fuel
\ndistribution,\" Erie told The Jakarta Post over the weekend.<\/p>\n
\"Allowing more players to distribute subsidized fuel will also
\nensure low prices for consumers and minimize problems with
\nshortages,\" he said.<\/p>\n
Erie cited recent cash flow problems faced by Pertamina, which
\nin turn put national fuel stocks at critical levels and affected
\nfuel distribution in some regions.<\/p>\n
Growing fuel consumption, along with declining crude oil
\noutput and limited refinery capacity, will put fuel distribution
\nat risk if it continues to be handled by one company, he said.<\/p>\n
Under the new plan, the government will subsidize only three
\nfuel products -- kerosene, automotive diesel and premium
\ngasoline. While kerosene is widely used by low-income households
\nand small businesses, automotive diesel and premium gasoline are
\nalso used by public transportation operators.<\/p>\n
The Oil and Gas Downstream Regulatory Body (BPH Migas) will
\ndetermine the volume of the subsidized fuel products to be
\ndistributed, and designate trading zones.<\/p>\n
BPH Migas will hold an open tender to pick the suppliers.<\/p>\n
\"To attract investors, it will be offered in a long-term
\ncontract,\" Erie said.<\/p>\n
Investors who can offer the cheapest price will win the
\ntender, he said.<\/p>\n
The open bidding to determine the suppliers of the subsidized
\nfuel products is part of the government's plan to establish a new
\noil-based products trading system as Pertamina relinquishes its
\nmonopoly over the oil downstream sector following the
\nimplementation of Law No. 22\/2001 on oil and gas.<\/p>\n
The law aims at opening up the oil and gas industry, over
\nwhich Pertamina has held a monopoly for decades.<\/p>\n
Under the planned trading system, oil-based fuel products will
\nbe grouped as regulated or non-regulated fuel products. Regulated
\nfuel products will include subsidized fuel.<\/p>\n
Non-regulated fuel products are different types of fuel that
\nwill be sold at market price. The products in this category will
\nbe separated into two groups based on fuel quality and prices.<\/p>\n
Pertamina will still play a role in supplying subsidized fuel
\nnationwide, but it will have to face competition in the supply of
\nnon-regulated fuel products.<\/p>\n
Erie said the new trading system was aimed at cushioning the
\ncountry in its transition to a fully free market system.<\/p>\n
However, those opposed to oil and gas liberalization said free
\nmarket competition would cause fuel prices to soar and in turn
\ncause political unrest.<\/p>\n
One advantage to the new fuel trading system, Erie said, was
\nthat the government would be able to control fuel subsidies since
\ncheap fuels would be made available only to those who needed it.
\nAt present, subsidized fuels are enjoyed by everyone regardless
\nof their economic status.<\/p>\n
The government is bracing for higher fuel subsidies this year
\nbecause it decided not to raise fuel prices to avoid political
\nunrest during the elections despite soaring worldwide oil prices.
\nDespite being a member of the Organization of Petroleum Exporting
\nCountries, Indonesia imports 20 percent of oil-based fuel
\nproducts as domestic refineries can only produce 80 percent of
\nconsumption, or one million barrels a day.<\/p>\n
Government officials have said a US$1 increase in oil prices
\n(on average over one year) against the oil price assumed in the
\nstate budget will add between Rp 700 billion and Rp 800 billion
\nto the deficit. While oil prices have shot up to a record $40 a
\nbarrel, the state budget assumes oil prices at $22 a barrel with
\nfuel subsidies reaching Rp 14 trillion.<\/p>\n
However, energy expert Ramses Hutapea said opening up the
\nmarket in the oil downstream sector should be done gradually in
\nline with the country's economic growth.<\/p>\n
\"Free market should not be applied based on the type of fuel
\nproducts but on economic growth because it relates to purchasing
\npower. This would be more effective to avoid political chaos,\"
\nRamses told the Post, adding that the liberalization of the oil
\nsector would take at least 10 years.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-to-tender-subsidized-fuel-1447893297",
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