Government to end subsidies on jet fuel
Government to end subsidies on jet fuel
JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto said on Monday the government would scrap subsidies
on jet fuel next month in adhering to its pledge to lift all fuel
subsidies.
"The government is committed to gradually lifting all
subsidies on fuels. Subsidies on aviation gasoline will be lifted
in January 1999," Kuntoro said in a news conference after the
installation ceremony for Martiono Hadianto, former director
general of customs and excise at the Ministry of Finance, as new
president of state oil and gas company Pertamina. He replaces
Soegianto.
The government raised prices of fuel up to 71.34 percent on
May 5 this year -- with jet fuel increased to Rp 600 (8 U.S.
cents) from Rp 420 -- in line with its bailout agreement with the
International Monetary Fund.
Following a public outcry, the government backtracked on the
fuel hikes with the exception of jet fuel.
Before the increase, jet fuel was heavily subsidized and
prices were maintained at rates significantly lower than
international ones.
The price of jet kerosene closed at US$12.98 per barrel, or
about Rp 608 per liter, on the spot market FOB Singapore on
Friday, down from $14.8 per barrel on Tuesday.
According to Pertamina data, the country's annual consumption
of jet fuel averages 8,500 liters, less than the production of
Pertamina's refineries of 15,000 liters annually.
Kuntoro said earlier this year that with an assumed crude oil
price of $14.5 per barrel and an exchange rate of Rp 6,000 per
dollar, the government needed at least Rp 9.5 trillion in fuel
subsidies for the current fiscal year.
He said fuel subsidies could increase by Rp 5 trillion every
time the exchange rate declined by Rp 1,000 against the dollar.
The rupiah, which plunged to its lowest level of Rp 17,000
against the dollar in January, has rebounded to a range between
Rp 7,500 and Rp 8,000 in the past three months.
In his speech at the installment ceremony, Kuntoro said
Martiono, 53, was faced with the daunting task of improving the
company's efficiency and maximizing the development of the oil
and gas sector for the public's benefit amid slumping oil prices.
Martiono will also have to ensure the country's largest state
company's readiness for global competition.
Martiono, a chemistry graduate of the Bandung Institute of
Technology and the holder of a MBA from the University of Oregon,
promised to continue the programs initiated by his predecessor in
rooting out corruption, collusion and nepotism and improving
efficiency.
He will face an uphill struggle to spruce up the tattered
public image of the company, derided as the cash cow of former
president Soeharto's family and its network of cronies.
The company recently divulged 159 of its contracts entered
into with Soeharto's family and cronies. Most of the contracts
have been retendered, renegotiated or annulled by Soegianto.
Asked if he would reshuffle the company's board of directors,
Martiono responded: "What's the reason? We have to look at the
case objectively. The principle is that there should be unity of
programs and vision (among board members)."
Martiono was appointed by President B.J. Habibie from four
candidates, which also included the president of publicly listed
state tin mining company, Erry Riyana Hardjapamekas, and
president of state gas distribution company Qoyum A.
Tjandranegara.
Businessman Fadel Muhammad said Martiono was a tough, brave
man who would be able to eradicate entrenched monopolistic
practices.
"I also want him to open free competition in the country's oil
and gas industry." (jsk)