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