Govt asked to lift fuel subsidy for export companies

Govt asked to lift fuel subsidy for export companies

JAKARTA (JP): State oil and gas company Pertamina asked the
government on Thursday to remove a fuel subsidy to export-
oriented companies by requiring them to buy the fuel at
international prices.

Pertamina president Baihaki Hakim said giving the subsidy to
export-oriented companies was not fair because they sold their
products in foreign currencies.

"Much of the current fuel subsidy spending falls into the
wrong areas," Baihaki told reporters following the donation of
humanitarian aid to the province of Aceh which was held in
conjunction with Pertamina's 43th anniversary.

According to Pertamina, the government could save Rp 9
trillion (US$947.36 million) in fuel subsidy spending each year,
if it forced export oriented companies to buy fuel at
international market prices.

He said that without a Presidential decree Pertamina had
problems persuading export oriented companies to start buying
fuel at international market prices.

"Our position now is difficult"...the government tells us, "do
your best," but that is difficult," he said.

Companies, he said, would pay no attention to Pertamina's
request, since what they sought was profit. "Businessmen have all
kinds of tricks, like threatening mass layoffs; it is a concern
to us," he said.

In May this year, Pertamina planned to order export oriented
companies to buy fuel at market prices, but strong opposition
from various industries caused the government to delay the plan.

Under the plan, industries which export 50 percent or more of
their product would have to buy fuel at international prices.

Then Minister of Mines and Energy Susilo Bambang Yudhoyono has
said that the government must first determine whether it was
possible to set two different fuel prices and how many industries
the policy would later affect.

He also said that the introduction of a such a policy must be
done in consultation with various parties including industrial
associations and the Finance Ministry.

"The idea of fixing fuel to market prices came from the
Finance Ministry," Baihaki went on.

In its 2000 state budget, the government predicted fuel
subsidy spending to reach Rp 22.46 trillion, but soaring fuel
prices and a weakening rupiah could send subsidy spending to over
Rp 30 trillion.

Baihaki said that the Finance Ministry was naturally
interested in finding ways to reduce subsidy spending, especially
if it could reduce the amount given to the wrong recipients.

Based on the State Audit Board's (BPKP) calculation, he said,
the government could safe up to Rp 9 trillion a year, if export
oriented companies bought fuel at international prices.

"This is a matter of national policy that needs to be
revised," he said.

But persuading export oriented companies is not sufficient
enough to make them abandon subsidized fuel, according to him.

"My job is now to urge (the government) to issue a
presidential decree to impose international fuel prices, so that
Pertamina has a legal base," he said.

At present, some companies are already buying fuel at
international prices, in particular foreign mining companies.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said Tuesday that the government did plan to order export
oriented firms to buy fuel at market prices.

The decision came following protests by the fishing concern
Djajanti Group and PT Bayer Indonesia. They questioned why they
were told to buy fuel at market prices while others had not.

Purnomo was quoted as saying by the daily Bisnis Indonesia
that the government would hence order the same to all export
oriented companies to avoid discrimination.

Baihaki also said that to ward off currency speculation,
Pertamina would buy U.S. dollars through Bank Indonesia (BI) when
importing fuel.

He said that each month Pertamina spent an average of US$570
million for the imports of fuel.

Previously Pertamina bought the U.S dollars through state
owned Bank Mandiri to finance the fuel imports.

"But Bank Mandiri is now having difficulties finding dollars,
so we buy it from BI," he said.

However, the central bank, will only allocate the foreign
exchange we need and send it to Bank Mandiri, from which
Pertamina then buys the U.S dollars, he explained.

Pertamina finance director Ainun Na'im said that Pertamina and
BI had agreed to cooperate in reducing currency speculation when
the company is purchasing U.S dollars.(bkm)