Miners, exporters to loose diesel subsidies

Miners, exporters to loose diesel subsidies

Rendi A. Witular, The Jakarta Post/Jakarta

The government plans to make miners and exporting companies pay
the market price for diesel in a move to save money on
increasingly costly subsidies for the fuel.

"Companies engaged in mining and export-oriented businesses
will have to pay for diesel fuel based on the market price," said
Coordinating Minister for the Economy Aburizal Bakrie after
meeting President Susilo Bambang Yudhoyono on Friday.

"Miners and exporters can afford to pay for diesel at the
market rate. The private sector should get used to the new
conditions; that the government will no longer provide them with
energy subsidies," he said.

Aburizal said the government was likely to issue the
regulation setting a new price for diesel in line with
international prices next month.

Industrial users currently pay state oil and gas company
Pertamina only 75 percent of the market rate. The government had
already increased the price of diesel for industry by 33 percent
from Rp 1,650 (17 U.S. cents) a liter to Rp 2,200 in May.

The government has already allocated Rp 76.5 trillion in its
budget this year to subsidize domestic fuels, including gasoline,
kerosene and diesel based on a global price average of $US45 a
barrel. Despite cutting some of the subsidies earlier this year,
continuing high oil prices -- now at around US$61 a barrel -- and
increasing domestic demand is pushing the subsidy costs to more
than Rp 110 trillion.

If the government shouldering the extra costs it will further
burden the already stretched national budget.

"We already have had to spend extra money on fuel subsidies in
the first six months of this year. However, the amount is still
at a controllable level," Aburizal said.

Speaking on the fuel shortage, the minister said PT Pertamina
officials had reported to the President that oil supplies were
back to normal in most parts of the country apart from several
remote cities.

Pertamina president director Widya Purnama said on Wednesday
that fuel stocks were expected reach a national average of 21.6
days in reserve supply, slightly lower than the safe level of 22
days.

Gas stations across the country have been short of fuel for
about two weeks after Pertamina cut back fuel supplies to the
regions so as not to overshoot the government-set quota of 59.6
million kiloliters (kl) supply for this year. The figure is below
last year's realized quota of 62.3 million kl.

National demand has been about 10 percent higher than budgeted
supplies for the first half of the year.