Pertamina to apply market prices to more industries
<p>Pertamina to apply market prices to more industries</p><p>Leony Aurora, The Jakarta Post, Jakarta</p><p>As pressure to rein in the fuel subsidy grows, state oil and gas
firm PT Pertamina will cut its subsidized fuel quota for
industries to eight kiloliters (kl) a month -- a third of the
current level.</p><p>Pertamina plans to apply the new policy beginning Sept. 15,
company spokesman Mochamad Harun said on Tuesday. Industries will
be required to pay market prices for fuel usage over eight kl a
month.</p><p>"We have to do this because the quota for subsidized fuel has
not increased, while the subsidy itself has been lowered," said
Harun.</p><p>A working committee of the House of Representatives' Budget
Commission decided last week to maintain a quota of 59.6 million
kl of subsidized fuel and to cut the subsidy to Rp 113.7 trillion
(US$11.3 billion) from an estimated Rp 138.6 trillion.</p><p>Pertamina expects total fuel consumption to reach 65.9 million
kl this year as demand accelerates along with economic growth.
The company wants to keep the quota under control by imposing
market prices on industries and on some three million kl of
overquota fuel required by state power firm PLN.</p><p>Pertamina began applying in July market prices for oil, gas,
mining and export-oriented industries, as well as entities that
use more than 500 kl of fuel. It included more industries,
including fisheries, those located in bonded zones, independent
power producers and any entities that use more than 24 kl of
fuel, in August.</p><p>This month, industries have to pay Rp 5,480 for a liter of
high-speed diesel and Rp 5,490 a liter for kerosene, as compared
to the subsidized price of Rp 2,200 per liter for both types of
fuels.</p><p>Separately, the Business Competition Supervisory Commission
(KPPU) said the different prices applied to industries were in
violation of Law No. 5/1999 on monopolies and unhealthy
competition.</p><p>Article 6 of the law stipulates that businesses may not make
deals that result in buyers having to pay different prices from
one another for the same goods or services.</p><p>"Small industries get to use subsidized diesel fuel," said
KPPU member Pande Radja Silalahi. "This can prompt a moral
hazard," he added, saying that there were reports of fishermen
selling their subsidized fuel to industries instead of using it
to fish.</p><p>The commission also questioned the legal basis used to
determine fuel prices for industries.</p><p>Article 3 of Presidential Regulation No. 22/2005 on fuel
prices, issued to legalize March's fuel price increase,
stipulates that the price of diesel fuel used for purposes other
than transportation stands at Rp 2,200 per liter.</p><p>No article in the regulation specifies any circumstances under
which a change of price is allowed.</p><p>"Fuel prices should be determined by the government, not by
Pertamina, which is an industry player," said another KPPU
member, Tadjuddin Noer Said.</p><p>The commission asked Pertamina to stop the price
discrimination. "We will give Pertamina some time before
beginning legal proceedings," said Pande. He declined to give a
specific time frame.</p>
firm PT Pertamina will cut its subsidized fuel quota for
industries to eight kiloliters (kl) a month -- a third of the
current level.</p><p>Pertamina plans to apply the new policy beginning Sept. 15,
company spokesman Mochamad Harun said on Tuesday. Industries will
be required to pay market prices for fuel usage over eight kl a
month.</p><p>"We have to do this because the quota for subsidized fuel has
not increased, while the subsidy itself has been lowered," said
Harun.</p><p>A working committee of the House of Representatives' Budget
Commission decided last week to maintain a quota of 59.6 million
kl of subsidized fuel and to cut the subsidy to Rp 113.7 trillion
(US$11.3 billion) from an estimated Rp 138.6 trillion.</p><p>Pertamina expects total fuel consumption to reach 65.9 million
kl this year as demand accelerates along with economic growth.
The company wants to keep the quota under control by imposing
market prices on industries and on some three million kl of
overquota fuel required by state power firm PLN.</p><p>Pertamina began applying in July market prices for oil, gas,
mining and export-oriented industries, as well as entities that
use more than 500 kl of fuel. It included more industries,
including fisheries, those located in bonded zones, independent
power producers and any entities that use more than 24 kl of
fuel, in August.</p><p>This month, industries have to pay Rp 5,480 for a liter of
high-speed diesel and Rp 5,490 a liter for kerosene, as compared
to the subsidized price of Rp 2,200 per liter for both types of
fuels.</p><p>Separately, the Business Competition Supervisory Commission
(KPPU) said the different prices applied to industries were in
violation of Law No. 5/1999 on monopolies and unhealthy
competition.</p><p>Article 6 of the law stipulates that businesses may not make
deals that result in buyers having to pay different prices from
one another for the same goods or services.</p><p>"Small industries get to use subsidized diesel fuel," said
KPPU member Pande Radja Silalahi. "This can prompt a moral
hazard," he added, saying that there were reports of fishermen
selling their subsidized fuel to industries instead of using it
to fish.</p><p>The commission also questioned the legal basis used to
determine fuel prices for industries.</p><p>Article 3 of Presidential Regulation No. 22/2005 on fuel
prices, issued to legalize March's fuel price increase,
stipulates that the price of diesel fuel used for purposes other
than transportation stands at Rp 2,200 per liter.</p><p>No article in the regulation specifies any circumstances under
which a change of price is allowed.</p><p>"Fuel prices should be determined by the government, not by
Pertamina, which is an industry player," said another KPPU
member, Tadjuddin Noer Said.</p><p>The commission asked Pertamina to stop the price
discrimination. "We will give Pertamina some time before
beginning legal proceedings," said Pande. He declined to give a
specific time frame.</p>