Fuel prices for industry raised by an average of 108%

Fuel prices for industry raised by an average of 108%

JAKARTA (JP): State oil and gas company Pertamina raised fuel
prices for industrial users by an average of 108 percent as of
April 1 in a bid to cut down government spending on fuel
subsidies.

However, as the new fuel prices were set at 50 percent of
international market prices, they could drop or rise further
according to developments in the international oil market,
Pertamina said in a statement.

"Based on presidential decree No. 45/2001 issued on March
30 .. the selling price for fuel is set at 50 percent of the
market price for the industrial sector as well as other sectors,
(including) fishing trawlers, tankers or barges carrying fuel for
fishing companies," the company said.

Pertamina raised the price for automotive diesel oil by 65
percent to Rp 990 (about 9.9 U.S cents) from Rp 600; industrial
diesel oil by 76 percent to Rp 970 from Rp 550; kerosene by 200
percent to Rp 1080 from Rp 350; and bunker oil by 92 percent to
Rp 770 from Rp 400.

The decree, Pertamina said, also stipulates that fuel retail
prices for household consumption, small industries, land and
water transportation, and for state electricity company PLN
remain unchanged.

Foreign ships, vessels with international destinations,
foreign mining, and oil and gas companies must pay fuel at the
full (international) market rate, the statement added.

These are Rp 1,950 for premium gasoline, Rp 2,150 for
kerosene, Rp 1,990 for automotive diesel oil, Rp 1,940 for
industrial diesel, and Rp 1,540 for bunker oil.

Pertamina's spokesman Ridwan Nyak Baik said the company would
issue new pricing for its fuel every month in line with fuel
price fluctuations in the international spot market.

"The new fuel prices are fixed for an entire month, regardless
of market fluctuations," Ridwan told The Jakarta Post.

He said that Pertamina would forecast fuel price fluctuations
and set the prices accordingly, based on the predicted
fluctuations.

"We will announce a new pricing list about one week before the
prices come to effect every month," he explained.

He said Pertamina would send copies of the monthly fuel price
list to its distribution centers across the country,

Buyers can check the new price list at Pertamina's depots and
bunker stations, where the company sells its fuel to industrial
users, he went on.

Besides reducing government spending on fuel subsidies, the
new fuel pricing policy also aims at discouraging the smuggling
of Pertamina's fuel abroad, mainly by shipping companies.

But analysts questioned the three-tier fuel pricing scheme,
saying that it could trigger contraband trade and other forms of
abuse.

Industrial users, for example, could buy through collusions
with Pertamina officials or distributors cheaper fuel allocated
for household consumers and public transportation.

But Ridwan said that gas stations, which will continue selling
fuel at current subsidized prices, have never been allowed by
Pertamina to serve industrial users.

"Every gas station must pump the fuel directly into a car's or
motorbike's gasoline tank," he said.

He added that in line with the three-tier fuel pricing scheme,
Pertamina had altered its fuel distribution system to ensure
better control.

He said that certain fuel distribution agents may only sell
fuel in their designated areas, and will not be allowed to enter
other regions to sell their fuel.

"This distribution scheme will enable us to control the use of
fuel more effectively in each region," he explained.

He said that previously, agents were allowed to go wherever
they wanted to sell fuel, making it difficult for Pertamina to
track their movements.

Ridwan said each agent will be supplied by Pertamina with a
fixed volume of fuel based on the need of the agent's customers
in the designated region. The agents would not be able to cheat
Pertamina regarding the amount of fuel they needed because the
state company always monitored the region's fuel consumption
pattern.

He said that Pertamina owned data on how much fuel companies
needed, and from which agents they got the fuel.

Although Pertamina cannot wholly prevent fuel from being sold
to the wrong hands, Ridwan said the company could always pinpoint
when transactions happened and where.

The government's decision to raise fuel prices has sparked
concern among industries which are still struggling to recover
from the economic crisis.

Last week, the Indonesian Textile Association (API) warned of
the imminent collapse of textile firms, if the government went
ahead with the fuel price hike.

API said that many textile firms were unable to shoulder the
additional cost burden stemming from the recent hike of power
prices and labor wages. (bkm)