PLN suffers Rp 5.26t in losses from inefficiency<\/p>\n
JAKARTA (JP): Inefficiencies at state electricity firm PT PLN
\nhave cost the company Rp 5.26 trillion (about US$750 million) per
\nyear, while the mismanagement of reforestation funds has left the
\ngovernment suffering $5.25 billion in losses, according to
\nindependent audits.<\/p>\n
Disclosing the results of the audit by Arthur Andersen,
\nCoordinating Minister of Economy, Finance and Industry Kwik Kian
\nGie said PLN suffered an average of Rp 5.26 trillion in losses
\nper year in the period from 1995 to 1998 due to inefficiencies in
\ninvestment and operations.<\/p>\n
Inefficiencies in investment amounted to Rp 4.14 trillion per
\nyear, or 38.69 percent of total annual investment, while
\ninefficiencies in operations reached Rp 1.12 trillion per year,
\nor 15.33 percent of total operation costs, Kwik added.<\/p>\n
Inefficiencies in investment included premature investment (Rp
\n1.64 trillion), procurement of materials (Rp 2.5 trillion) and
\ncostly project financing.<\/p>\n
Regarding inefficiency in operational costs, Kwik said PLN's
\nloss of Rp 1.12 trillion was primarily due to the high price of
\ngas transportation and the take-or-pay clause in its gas purchase
\ncontracts.<\/p>\n
The audit, however, did not cover the controversial power
\npurchase agreements (PPAs) signed by PLN and 27 independent power
\nproducers in the period.<\/p>\n
The PPAs are believed to have significantly increased PLN's
\noperational costs.<\/p>\n
Minister of Mines and Energy Susilo Bambang Yudhoyono said he
\nwould consider auditing PPAs when it was deemed necessary.<\/p>\n
Disclosing the results of audits on reforestation funds by
\nErnst & Young, Kwik said the Indonesian government suffered a
\ntotal loss of $5.25 billion due to the inefficiency and the
\nmismanagement of its reforestation funds in the period from April
\n1, 1993 to March 31, 1998.<\/p>\n
He said the government lost $3.40 billion in the period
\nbecause of a misuse of funds, illegal logging and irregularities
\nin the collection of the funds during the period. It also lost
\n$1.85 billion from potential interest on the missing $3.40
\nbillion.<\/p>\n
The reforestation funds are collected from logging companies
\nto finance the rehabilitation of forests damaged during logging
\nactivities.<\/p>\n
The funds, however, had been used for other purposes,
\nincluding industrial forestry projects, sports events and
\nairplane projects.<\/p>\n
Kwik said the inappropriate use of the funds for industrial
\nforestry projects caused a loss of $223 million during the
\nperiod. The misuse of the funds for the airplane project of PT
\nIndustri Pesawat Terbang Nusantara and the Southeast Asian Games
\nsporting event caused $669.9 million in losses.<\/p>\n
Soeharto's instruction to deposit the funds in state-owned
\nbanks also caused the government to lose the opportunity of
\nreceiving an interest income of about $120.9 million as state
\nbanks paid lower interest rates than private banks, Kwik said.<\/p>\n
Kwik advised the public that the losses were the results of
\ninefficiency and mismanagement, not of corruption, collusion and
\nnepotism.<\/p>\n
"We are not covering up corruption. There is a distinct
\ndifferent between inefficiency and corruption because somebody
\ncan be very, very honest but not efficient. If there are
\nindications of corruption, then we will conduct an investigative
\naudit," he said.<\/p>\n
The auditing of PLN and the reforestation funds is part of the
\nfirst phase of international auditing agreed upon by the
\nInternational Monetary Fund and the government.<\/p>\n
Also, as part of the first phase of the auditing program,
\nPricewaterhouseCoopers and Arthur Andersen earlier completed the
\nauditing of state oil and gas company Pertamina and the National
\nLogistics Agency respectively.<\/p>\n
Kwik said the government would soon hold the second phase of
\nthe auditing program with the international auditing of national
\nflag carrier PT Garuda Indonesia, state toll road company PT Jasa
\nMarga, state seaport company PT Pelindo, state telecommunication
\ncompanies PT Telkom and PT Indosat and state plantation company
\nPT Perkebunan Nusantara. (jsk\/rid)<\/p>",
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