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)