Chandra Asri gets 25 percent import tariff protection
JAKARTA (JP): The government has made permanent the temporary protection granted in February to PT Chandra Asri Petrochemical Center, subject to scheduled tariff cuts.
Minister of Industry and Trade Tunky Ariwibowo confirmed over the weekend that under a new deregulation package announced last week, Chandra Asri would now receive permanent protection.
"With the new regulations, PT Chandra Asri must follow the pattern of the existing tariff reduction scheme, that is, by 2003 its maximum tariff will be 10 percent," Tunky said.
In February, Chandra Asri's ethylene and propylene were given temporary protection until June 30, with a 20 percent surcharge on top of the existing 5 percent import tariff on both olefin products.
According to Finance Minister Decree No. 378/KMK.01/1996, dated June 4, both ethylene and propylene will be protected by a 25 percent import tariff each. The decree is part of the government's new reform package.
When announcing the new deregulation package last week, Minister of Finance Mar'ie Muhammad said the new tariff scheme, including those on the olefin products, will be affective on July 1.
Tunky confirmed that the finance minister's decree dated June 4 revised two previous finance minister decrees -- Finance Minister Decree No. 56/KMK.01/1996, dated 2 February, 1996, and Finance Minister Decree No. 81/KMK.01/1996, dated February 19, 1996 -- which had given tariff and nontariff protection only until this month.
"It used to be temporary, but with this revised regulation, ethylene and propylene products will follow the new tariff reduction scheme," Tunky said, reported Bisnis Indonesia.
Mar'ie said that the definition of surcharge is not found in the 1995 Customs Law, and therefore, the new package transfers the existing surcharges to the tariff scheme or eliminates them altogether.
"However, for a certain number of products, which are considered necessary to be protected...the existing surcharges are cumulatively included in the tariff rate," Mar'ie said.
Hail
Economist Christianto Wibisono hailed the government's decision to include the protection for Chandra Asri in its gradual tariff reduction scheme.
"Every protection given to a certain sector, such as petrochemical and automotive sectors, shall follow such a timetable so that their dependency on such a protection can be reduced," Christianto told The Jakarta Post on Saturday.
Chandra Asri, with a total investment of US$2 billion, began operations in May last year with a designed capacity of 510,000 tons of ethylene per annum, 240,000 tons of propylene, 300,000 tons of polyethylene and 230,000 tons of pyrolysis gasoline.
During its first year of operations, the chemical plant manufactured 322,000 tons of ethylene, 185,000 tons of propylene, 160,000 tons of pyrolysis gasoline and 178,000 tons of polyethylene.
Chandra Asri procures its condensate feedstock from the Kangean gas field offshore East Java and naphtha from the Cilacap oil refinery in Central Java and the Middle East.
Chandra Asri has been rocked by criticism since the company asked the government's tariff protection for its olefin products in mid-1994.
Until late last year, government officials, including ministers Mar'ie Muhammad and Tunky, repeatedly said the government would neither give tariff protection, tax incentives nor regulatory protection to Chandra Asri.
Chandra Asri is jointly owned by the Barito Pacific, Bimantara and Napan groups -- all believed to wield strong political clout -- and Japan's Marubeni Corp, Toyo Engineering and Showa Denko. The first two groups also have stakes in PT Tri Polyta Indonesia, a public company whose shares are listed on the Nasdaq stock exchange in New York.
Chandra Asri has been selling all of its propylene production to Tri Polyta, the country's largest producer of polypropylene.
Under the new deregulation measure, the government also made permanent the temporary protection for polypropylene and polyethylene.
Imports of both polypropylene and polyethylene are currently subject to a 20 percent import duty and another 20 percent surcharge.
Under the finance minister decree dated June 4, both polypropylene and polyethylene will be protected by a 40 percent import tariff -- and no more surcharge is imposed.
Olefin products are used for the production of plastic wares. Domestic demands for olefin products remain high. Last year, Indonesia imported 349,884 tons of ethylene valued at US$173.43 million, 236,514 tons of propylene at $143.77 million, 200,260 tons of polyethylene at $230 million and 140,260 tons of polypropylene at $168.48 million. (rid)