Local govts to take over kerosene distribution

Local govts to take over kerosene distribution

Fitri Wulandari, The Jakarta Post, Jakarta

State oil and gas firm PT Pertamina plans to transfer the
distribution and supervision of subsidized kerosene to local
governments when its monopoly over the domestic fuel market comes
to an end next year.

"In order to focus on more profit-oriented activities,
Pertamina will the transfer the responsibility for distributing
kerosene to local governments. Pertamina will serve as the bulk
supplier and stock keeper," Rahmat Drajat, Pertamina's deputy
director for marketing, said on Friday.

Rahmat said local governments were better able to supervise
and manage the distribution of kerosene as their networks
stretched right down to the lowest administrative level.

"Local governments will have better information on the demand
for subsidized kerosene within their jurisdictions," he added.

Transferring kerosene distribution to local governments would
not affect the subsidy or the price, Rahmat said

Subsidized kerosene is sold at Rp 700 (around 8 U.S. cents)
per liter while kerosene is sold to industry for between Rp 1,800
and Rp 2,000 per liter.

The transfer of kerosene distribution from Pertamina to local
governments would be carried out gradually so as to make sure
they were ready to shoulder their new responsibilities, Rahmat
said.

"We can start with pilot projects first before fully
transferring the responsibility," Rahmat said, adding that the
plan was still being discussed with the government.

Subsidized kerosene is still widely used, mainly for cooking,
by people in the lower income brackets.

Pertamina has to relinquish its monopoly over the distribution
of hydrocarbon-based fuels, including kerosene, as a consequence
of Law No. 22/2001 on the oil and gas industry. Pertamina, which
was turned into a limited liability last year, is scheduled to
give up its fuel distribution monopoly on Nov. 23, 2005. After
that, any company will be allowed to distribute fuel in the
country.

Under the new scheme, subdistrict administrations in cities
and village administrations in rural areas will handle
distribution under the supervision of the municipal or regental
government.

Local governments in collaboration with the Oil and Gas
Downstream Regulatory Body (BPH Migas) will decide on the
quantity of kerosene based on actual demand. Later, the proposals
will be submitted to the central government and the House of
Representatives for approval.

The subsidized kerosene will be distributed by subdistrict or
village administrations directly from fuel depots to household
consumers through neighborhood unit (RW) offices.

The neighborhood units will record the details of the
households entitle to the subsidized kerosene.

"This will minimize the possibility of abuses or hoarding as
neighborhood units know their communities," Rahmat said.

The subdistrict and village administrations could also appoint
kerosene retailers to distribute the fuel.

To prevent the fuel being sold to industry or other consumers,
the fuel depots would be required to report regularly to the
local governments.

In order to control consumption, neighborhood unit offices
would keep cards recording the amount of kerosene received by
each household.

At present, Pertamina is paid a fee by the government for
selling fuel on the local market at subsidized prices. The firm
often faces problems in distributing kerosene as some traders
illegally sell kerosene allocated for household use to industry
-- a practice that often leads to kerosene shortages.

Rahmat said that if local governments were not ready up to the
task and the central government asked Pertamina to continue doing
the job, the state firm would accede to the request provided the
government paid it a higher fee.
y