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)