Pertamina ups diesel fuel price for miners

Leony Aurora, The Jakarta Post, Jakarta

State oil and gas firm PT Pertamina quietly raised the price of diesel fuel for mining and oil companies on July 1 to meet market prices, although there has been no changes in the presidential regulation on domestic fuel prices.

Pertamina's fuel division head Achmad Faisal confirmed the hike, saying that according to the new decree, mining companies and big firms -- those consuming more than 500 kiloliters (kl) of diesel fuel per month -- must pay according to market prices.

The formula to determine the price is 15 percent higher than the mid oil platts Singapore (MOPS), he said.

"At present, it stands at about Rp 4,700 (48 U.S. cents) (per liter)," he added. Before the decree, all companies were charged Rp 2,200 per liter for the subsidized diesel fuel.

Faisal said that Pertamina had received a letter from the Ministry of Energy and Mineral Resources supporting this measure. "The minister said it was unfair that export-oriented industries paid only Rp 2,200," he added.

He estimated that with such a measure, between 11 million kl and 13 million kl of diesel fuel would be procured without a government subsidy for the rest of the year, meaning the government would save at least Rp 27.5 trillion.

Energy minister Purnomo Yusgiantoro supported Pertamina's move, saying the firm may raise prices as long as it is done according to prevailing regulations.

Article 3 of Presidential Regulation No. 22/2005 on fuel prices, issued on Feb. 28, 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 in the price is allowed.

"It's up to the interpretation (of the regulation)," said Purnomo when asked about the diesel fuel prices. "If consumers agree to pay (higher prices), Pertamina can do so.

"(Pertamina) has to talk to the consumers first," he added.

Wahyudin Yudiana Ardiwinata, president director of PT Caltex Pacific Indonesia, which produces almost half of the country's oil output in Riau, said that Pertamina had not discussed any possibility of raising diesel fuel prices.

He also said that he had not received the circular about the fuel hike. "Perhaps it is still on the way," he said.

Yudiana said the hike would have more impact on contractors, to which the company outsourced transportation and parts of the operation, than on Caltex itself.

"Of course there will be an effect, but we are committed to following the government's regulation," he added.

President Susilo Bambang Yudhoyono on Sunday issued a presidential instruction on energy conservation, a move aimed to suppress domestic fuel consumption and subsequently the ballooning subsidy.

Purnomo said his ministry had sent proposals to every related ministry and institution, such as Pertamina and state power firm PT PLN, on ways to conserve energy.

"It's up to them how to implement (the suggestions)," he said. "We will be the coordinator and report results every six months to the President."