New diesel oil policy rattles fishing companies

JAKARTA (JP): Industrial users of diesel oil, notably fishing companies, in eastern Indonesian areas, are shocked by a new policy of state oil company Pertamina which will fix the price of diesel oil at the international level starting next month.

The Association of Indonesian Fishing Companies (Gappindo) said on Thursday that if the new pricing policy was imposed, many fishing boats might be forced to stop operations as the measure would more than triple the cost of the fuel.

"This pricing policy will sabotage the government's program to optimize the development of marine resources, one of the country's largest earners of foreign exchange," Gappindo's chairman Sutara Martadisastra said.

Sutara was commenting on an April 20 directive from Pertamina's logistics center in Jayapura, Irian Jaya, that requires all industrial users, including fisheries and other export-oriented companies, which use tanker boats or barges to procure diesel oil from Pertamina depots, to pay for the fuel in American dollars and at the international price level.

The directive did not specify the reason behind the new policy but industry sources immediately blamed it on the recent controversy set off by the uncovering of large scale smuggling of diesel oil and kerosene from Jakarta and other islands to foreign countries.

Export smuggling has become greatly lucrative, especially in the wake of the recent rally of international oil prices, as domestic fuel oil in the country is still subsidized.

Pertamina now sells diesel oil at Rp 600 per liter, compared to the international price of about US$250 per ton or Rp 2,000 per liter.

Sutara said the impact of new pricing policy would be devastating, especially for fishing companies which have to procure diesel oil in tanker boats or barges because their processing plants and operational bases were mostly located far from Pertamina depots.

"As fuel accounts for 40 percent to 60 percent of the operational costs of fishing companies, the new policy will drive many companies out of business with all their economic and social implications," he added.

Sutara maintained that the diesel oil pricing policy was entirely against the government's drive to attract investors to the least developed eastern Indonesian areas.

"It is an anomaly that while the government is offering import duty reliefs and tax incentives for investment ventures in eastern Indonesian areas, Pertamina is punishing industrial users of diesel oil in these areas," he added.

Gappindo said the measure was not the most effective way of preventing export smuggling but it might instead kill the fishing industry in eastern Indonesian areas.

The association pointed out that fishing, besides mining and plantations, was the largest foreign exchange earner for the country, especially after the economic crisis since late 1997.

"We, therefore, strongly urge the government to cancel Pertamina's new diesel oil pricing policy which is scheduled to be implemented next month," Sutara added.