PLN suffers Rp 5.26t in losses from inefficiency
JAKARTA (JP): Inefficiencies at state electricity firm PT PLN have cost the company Rp 5.26 trillion (about US$750 million) per year, while the mismanagement of reforestation funds has left the government suffering $5.25 billion in losses, according to independent audits.
Disclosing the results of the audit by Arthur Andersen, Coordinating Minister of Economy, Finance and Industry Kwik Kian Gie said PLN suffered an average of Rp 5.26 trillion in losses per year in the period from 1995 to 1998 due to inefficiencies in investment and operations.
Inefficiencies in investment amounted to Rp 4.14 trillion per year, or 38.69 percent of total annual investment, while inefficiencies in operations reached Rp 1.12 trillion per year, or 15.33 percent of total operation costs, Kwik added.
Inefficiencies in investment included premature investment (Rp 1.64 trillion), procurement of materials (Rp 2.5 trillion) and costly project financing.
Regarding inefficiency in operational costs, Kwik said PLN's loss of Rp 1.12 trillion was primarily due to the high price of gas transportation and the take-or-pay clause in its gas purchase contracts.
The audit, however, did not cover the controversial power purchase agreements (PPAs) signed by PLN and 27 independent power producers in the period.
The PPAs are believed to have significantly increased PLN's operational costs.
Minister of Mines and Energy Susilo Bambang Yudhoyono said he would consider auditing PPAs when it was deemed necessary.
Disclosing the results of audits on reforestation funds by Ernst & Young, Kwik said the Indonesian government suffered a total loss of $5.25 billion due to the inefficiency and the mismanagement of its reforestation funds in the period from April 1, 1993 to March 31, 1998.
He said the government lost $3.40 billion in the period because of a misuse of funds, illegal logging and irregularities in the collection of the funds during the period. It also lost $1.85 billion from potential interest on the missing $3.40 billion.
The reforestation funds are collected from logging companies to finance the rehabilitation of forests damaged during logging activities.
The funds, however, had been used for other purposes, including industrial forestry projects, sports events and airplane projects.
Kwik said the inappropriate use of the funds for industrial forestry projects caused a loss of $223 million during the period. The misuse of the funds for the airplane project of PT Industri Pesawat Terbang Nusantara and the Southeast Asian Games sporting event caused $669.9 million in losses.
Soeharto's instruction to deposit the funds in state-owned banks also caused the government to lose the opportunity of receiving an interest income of about $120.9 million as state banks paid lower interest rates than private banks, Kwik said.
Kwik advised the public that the losses were the results of inefficiency and mismanagement, not of corruption, collusion and nepotism.
"We are not covering up corruption. There is a distinct different between inefficiency and corruption because somebody can be very, very honest but not efficient. If there are indications of corruption, then we will conduct an investigative audit," he said.
The auditing of PLN and the reforestation funds is part of the first phase of international auditing agreed upon by the International Monetary Fund and the government.
Also, as part of the first phase of the auditing program, PricewaterhouseCoopers and Arthur Andersen earlier completed the auditing of state oil and gas company Pertamina and the National Logistics Agency respectively.
Kwik said the government would soon hold the second phase of the auditing program with the international auditing of national flag carrier PT Garuda Indonesia, state toll road company PT Jasa Marga, state seaport company PT Pelindo, state telecommunication companies PT Telkom and PT Indosat and state plantation company PT Perkebunan Nusantara. (jsk/rid)