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)