Govt moves to secure domestic fuel supply

Muninggar Sri Saraswati, The Jakarta Post, Jakarta

To ensure PT Pertamina meets its tasks of securing domestic fuel supply, the government has disbursed Rp 3.3 trillion (US$347.19 million) to the state oil and gas firm to help it finance crude oil imports.

Coordinating Minister for Economic Affairs Aburizal Bakrie said on Monday the subsidy, derived from emergency reserve funds, should help secure 20-days of fuel supplies.

Pertamina has been in dire need of a cash infusion to import oil, having spent all the Rp 19 trillion in fuel subsidy funds allocated in the initial 2005 state budget -- causing fears over the threats of a fuel shortage in the near future.

Although the government has revised upward fuel subsidy allocations in the 2005 state budget, approval from the House of Representatives is needed before the additional funds can actually be disbursed.

Critics say the Rp 3.3 trillion in funds is not expected to be sufficient for Pertamina's needs as the cash-strapped company usually needs between $800 million and $1.1 billion a month to finance the country's oil imports.

Aburizal however, said the government had also decided to pay a separate Rp 1.2 trillion a month to Pertamina until December this year. He did not mention where the funds would come from.

An assessment will be conducted by the government every month.

"The government has fulfilled its obligations. There will be no problem with Pertamina's cashflow to fulfill its duties (providing subsidy fuel), but Pertamina must follow the rules," he said. The state oil and gas firm could only buy dollars from state banks to import oil to ease the pressure on the rupiah, he said.

A delay in the government's fuel subsidy disbursement would mean that Pertamina would have to cover the cost of importing oil first, before later asking the government for reimbursement.

Aburizal said the government would also pay its obligations, mostly in the form of unpaid subsidies, to Pertamina in 2004 and 2003 pending the completion of a verification by a team consisting officials from the Ministry of Finance and Pertamina.

"The team will complete its verification in a week," he said, reiterating the government's commitment to securing domestic fuel supplies.

The 2005 state budget, which was drafted based on an oil price assumption of $24 per barrel, only provided Rp 19 trillion in fuel subsidy funds for the whole year.

With world oil prices lately surging past $50, however, the government hiked fuel prices by close to $30 percent in March and proposed an oil price assumption of $35 per barrel in the budget revision, to cut the bloating fuel subsidy from Rp 60.1 trillion to Rp 39.7 trillion.

The deliberation of the revised 2005 budget is scheduled to start later this week.