7 Pertamina officials arrested on fuel smuggling charges
The Jakarta Post, Jakarta
The police have arrested seven officials of state-controlled oil and gas company PT Pertamina and a Singaporean citizen for involvement in the smuggling of subsidized fuel products to neighboring countries.
National Police chief Gen. Sutanto said on Thursday that the police had also seized five Indonesian-flagged ships and three foreign-registered vessels used in the fuel smuggling.
Sutanto declined to disclose the names of the suspects, but said that they were part of the fuel smuggling networks operating in Surabaya, East Java; and Makassar, South Sulawesi.
President Susilo Bambang Yudhoyono said that the government would intensify its efforts to curb fuel smuggling as part of its package of economic measures announced on Wednesday to help resolve the country's current economic problems.
The current government fuel subsidy policy, which leads to relatively low fuel prices at home compared to prices on the international market, has made it profitable for smugglers to illegally export Indonesian fuel products.
Rampant fuel smuggling is seen as one of the major factors causing fuel shortage in many parts of the country, forcing Pertamina to import more fuel to meet domestic demand and consequently increasing budget spending on fuel subsidies.
The expensive fuel subsidies now represent a major threat to the sustainability of the state budget due to soaring international oil prices.
Although Indonesia is an oil producing country, it still has to import part of its fuel needs due to declining production at home amid a lack of investment in new oil fields.
Increasing doubts over the ability of the government to cover the widening state budget deficit has put strong pressure on the rupiah, which early this week plunged to a four-year low of around Rp 11,000 per U.S dollar.
Economists have urged the Susilo administration to immediately raise fuel prices and reduce subsidies in a bid to ensure budgetary sustainability.
Experts have also said that eliminating the fuel subsidies, or reducing them significantly, would also be effective in curbing fuel smuggling as it would no longer be profitable.
As a vast archipelagic nation, it is difficult for law enforcement agencies to effectively prevent fuel smugglers from exporting the heavily subsidized fuel products to neighboring countries. The problem is also compounded by widespread corruption in these agencies.