Coal mining firms can buy fuel at 50% of market prices

Coal mining firms can buy fuel at 50% of market prices

JAKARTA (JP): The government said on Monday that coal mining
firms can buy fuel at 50 percent of international market prices,
instead of the full rate as required of other mining sectors.

Director general for oil and gas at the Ministry of Energy and
Mineral Resources, Rachmat Sudibyo said the government had
exempted coal mining firms from paying the full price.

"When we decided to impose the fuel price hike, coal mining
firms were categorized as industries and not as foreign mining
firms," Rachmat explained.

The government earlier said that foreign holders of mining
contracts, which for general mining firms are known as Contract
of Works (CoW) holders, must pay for fuel at the full market
price.

But the government did not clarify whether these include
foreign coal mining firms.

Aside from foreign mining firms, foreign oil and gas companies
must also pay fuel at international market prices.

Rachmat confirmed an earlier statement by director general for
geology and mineral resources Wimpy S. Tjejep, who said that the
full market rate for fuel did not apply to coal mining firms.

However, Rachmat rejected Wimpy's statement as quoted by
Antara, which said that this policy was only temporary.

Wimpy said earlier that coal mining firms needed to pay for
fuel at only half the market price because paying the full rate
would be too financially burdensome.

"The impact of fuel prices in production costs of coal mining
firms, especially for those with deep mines, stands at about 12
to 15 percent," he explained.

According to him, the government has delayed imposing the full
market rates, until Indonesian coal becomes more competitive in
the market.

But Rachmat denied that the government had linked the coal
industry's competitiveness with paying only half the fuel market
prices.

"We never intended to have coal mining firms pay the full
market price for fuel," he said.

Meanwhile, state oil and gas company Pertamina said it had
recorded no rush in fuel demand, despite earlier announcements of
higher fuel prices.

Pertamina's downstream director Ariffi Nawawi said that the
distribution of fuel to industrial consumers remained stable.

"As you can see by yourself, there is not an unusually long
line-up of fuel trucks here, everything is normal," he was quoted
as saying by Antara during an inspection at Pertamina's fuel
depot at Plumpang, North Jakarta.

According to him, the national fuel supply is at its normal
level of 25 days.

"We also haven't heard of any fuel shortages in other
regions," he added.

Since the government raised industrial fuel prices to 50
percent of market rates, companies now face an average increase
of 108 percent in fuel prices.

The general public, however, can still enjoy the current
subsidized fuel prices at gas stations.

However, the three-tier pricing opens opportunities to
contraband trade and other forms of abuse.

Ariffi admitted the difficulty of preventing abuses from
taking place, but added Pertamina was intensifying its control of
fuel distribution.

"Pertamina knows the fuel demand for industries. They
(industries) must buy the fuel from Pertamina's depot directly
instead of through gas stations," he explained.

But he added that Pertamina can not currently detect companies
who swipe one or two drums of the fully subsidized fuel.(bkm)