Pertamina to float price of LPG to avoid losses
Pertamina to float price of LPG to avoid losses
The Jakarta Post, Jakarta
State-owned oil and gas company Pertamina, claiming that it
has to shoulder losses from the current pricing system, will
float the price of liquefied petroleum gas (LPG) while
controlling fluctuations by applying floor and ceiling levels.
Pertamina's downstream director Muchsin Bahar said on Monday
that the planned price, which was set to take affect in August
2003, would be denominated in U.S. dollars and be pegged to
Aramco's contract price (CP) development.
"The calculation will be like that for oil fuel prices, and it
will be adjusted every month," Muchsin told reporters, adding
that the company was still studying the figures for floor and
ceiling prices.
The current LPG price is fixed at Rp 2,700 (30 U.S. cents) per
kilogram.
Muchsin said with the exchange rate of the rupiah standing at
Rp 8,250 against the greenback, Pertamina suffered a loss of Rp
50 per kilogram.
By applying the floating price, the volatility of the LPG
price would depend much on the rupiah exchange rate, he said.
"Therefore, if the rupiah's value reaches Rp 8,250 per U.S.
dollar in August, the LPG price will be raised by Rp 50 per
kilogram from its current price. But if the rupiah strengthens to
Rp 8,000, then we don't have to hike the price," he explained.
Asked if the volatility of the LPG price would proceed at the
expense of consumers, Muchsin promised Pertamina would keep the
fluctuations in check.
LPG is widely used by middle- to upper-income households in
major cities, and the amount of LPG marketed in Indonesia reaches
one million metric tons per year. In Jakarta alone, there are
some 200,000 households using LPG for cooking.
Last year, Pertamina had again raised the price of LPG from Rp
28,800 to Rp 32,400 per 12-kilogram tank.
Pertamina's planned move to increase the LPG price has been
condemned by consumer protection activists.
However, Muchsin defended the move, saying that with a higher
LPG price, more players would enter the market.
Currently, Pertamina is the only LPG producer and provider in
the country.
Meanwhile, he said that oil fuel prices were expected to
remain stable next month at their current levels, because crude
oil prices on the world market stood at between $26 and $27 per
barrel.
"If the exchange rate for the U.S. dollar remains stable next
month, the domestic fuel prices are likely to stay the same," he
said.
In January, responding to nationwide protests against the
government's decision to raise fuel prices, President Megawati
Soekarnoputri made only small adjustments. The price of
automotive diesel was cut to Rp 1,650 per liter from the previous
price of Rp 1,890 per liter, while the price of industrial diesel
was reduced to Rp 1,650 from Rp 1,860. The price of heavily
subsidized kerosene for industrial use was lowered slightly to Rp
1,800 from Rp 1,970.
The prices of other fuel products, including premium gasoline
and kerosene for household needs, were maintained.