Pertamina cuts fuel supply to industry

Debbie A. Lubis, The Jakarta Post, Jakarta

The state-owned oil and gas company Pertamina confirmed on Thursday it had reduced the supply of subsidized fuel products to several sectors, including the plywood and textile industries, citing a slowdown in the industries concerned.

Pertamina public relations chief Ridwan Nyak Baik said the company would only supply subsidized fuel based on the real needs of the industries.

"We just want to be fair. The subsidized fuel supply for the public and industry should be based on their real needs. If we give a supply that exceeds their real needs, it will be misused," Ridwan told The Jakarta Post.

He pointed out that production in the domestic plywood industry had dropped by 50 percent due to environmental issues, while the textile industry had been slowing down amid the U.S.- led global economic downturn.

"So what's the excessive supply for?," he asked.

He said that the companies involved would only be allowed to get more fuel than their real needs at non-subsidized prices.

In January, the government set the prices of fuel products for industry at 75 percent of the Mid Oil Platt's Singapore (MOPS), higher than the previous 50 percent of MOPS.

The government has been trying to limit fuel subsidies under the state budget, which is already heavily burdened by the huge cost of bailing out ailing banks.

Heavily subsidized fuel products in the past had also benefited smugglers who sold them to neighboring Singapore, Malaysia and Thailand at the expense of taxpayers.

Elsewhere, Ridwan said that state-owned auditing firm PT Sucofindo was currently making an assessment of the real needs of various industries and the public for subsidized fuel products so as to allow Pertamina to design a better supply policy in the future.

Ridwan did not say when exactly Pertamina would start reducing the supply of subsidized fuel products to the industries in question.

But the Indonesian Synthetic Fiber Makers Association (APSyFI) said in a statement to the Post that Pertamina had cut by 40 percent the supply of subsidized fuel to its members in September last year.

Pertamina argued at the time that the move was necessary because the subsidies allocated under the 2001 state budget would not cover a greater amount of fuel supply.

The association said that Pertamina had reduced the fuel supply by 10 percent over the past two months .

APSyFI said that Pertamina's policy went against the presidential decree which stipulated that fuel prices for industrial users should be set at 75 percent of MOPS.

"... It (the decree) does not mention anything about reducing the supply of subsidized fuel to industry," it said.

The association asserted that this kind of uncertainty would increase production costs and affect the competitiveness of local synthetic fiber makers overseas.

APSyFI said that the synthetic fiber industry required a stable fuel supply as it operated 24-hour production processes using a huge amount of fuel for the high-technology machinery and equipment.

It added that Pertamina was engaging in unfair business practices.

"Consumers are in a very weak bargaining position against Pertamina with the result that it has abused its monopoly over fuel distribution in Indonesia at the cost of industry," APSyFI said.

The synthetic fiber industry is the upstream sector that supports the Indonesian textile industry, one of the four selected industrial sectors that will be revitalized by the government as it is labor intensive, creates added value and is export-oriented.

The association said that an unstable fuel supply for industry would jeopardize the success of the revitalization program, lower foreign currency revenue from textile exports, and raise unemployment.