Pertamina to apply market prices to more industries
Leony Aurora, The Jakarta Post, Jakarta
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.
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.
"We have to do this because the quota for subsidized fuel has not increased, while the subsidy itself has been lowered," said Harun.
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.
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.
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.
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.
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.
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.
"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.
The commission also questioned the legal basis used to determine fuel prices for industries.
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.
No article in the regulation specifies any circumstances under which a change of price is allowed.
"Fuel prices should be determined by the government, not by Pertamina, which is an industry player," said another KPPU member, Tadjuddin Noer Said.
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.