Regions demands payment of oil revenue

Regions demands payment of oil revenue

Fitri Wulandari, Jakarta

The country's oil and gas producing regions demanded on
Tuesday that the central government disburse their share of oil
and gas revenue totaling Rp 2.73 trillion (US$294.66 million).

The regions also rejected a proposal to share the burden of
the fuel subsidy with the central government, arguing that it was
the central government's responsibility.

"We need the (oil and gas) revenue to finance our development
programs. There are roads to be built, school buildings to be
repaired but we can't do it due to the lack of cash," Alex
Noerdin, chairman of the Consultative Forum of Oil and Gas
Producing Regions (FKPDM), told reporters in a press conference.

He said the regions were all very much reliant on oil and gas
revenue and the late disbursement of the funds had forced the
regions to delay some projects, Alex said.

According to Alex, the government had not paid some Rp 451
billion in revenue for the fourth quarter of last year, and
another Rp 2.28 trillion for the first quarter of this year.

"The funds should be disbursed to the regions every quarter.
But the central government has always been late," said Alex, who
is the regent of Musi Banyuasin, in South Sumatra.

Regions are entitled to a revenue share from oil and natural
gas following the introduction of regional autonomy law in 2001.

The share is 15 percent for oil and 30 percent for natural gas
from the total actual oil and gas revenue received by the central
government after the revenue of oil and gas contractors is
deducted.

The regions' share is set each year based on oil and gas
production and the oil price assumption in the state budget.
However, the revenue will be adjusted to actual crude prices.

Andang Bachtiar, an expert staff at FKPDM said the regions
should receive a total of Rp 9.1 trillion in revenue this year.
It was lower than the Rp 10.7 trillion in 2003 and Rp 11.1
trillion in 2002.

The funds are disbursed to some 440 regencies and city
administrations. Regions who have oil and gas resources receive a
higher revenue than those who do not.

Elsewhere, Alex said the forum rejected a proposal to share
the burden of the costly government fuel subsidy program.

"It is the responsibility of the central government. The
revenue sharing is not related to the fuel subsidy," he said,
adding that the central government should be more creative in
seeking ways to resolve the rising cost of the fuel subsidy.

The central government had projected that the fuel subsidy in
the 2004 state budget may triple to Rp 46 trillion compared to
the initial allocation of Rp 14.5 trillion due to soaring oil
prices. The new projection is based on an oil price assumption of
$35 per barrel, while the current budget is based on oil price
assumption of $22 per barrel.

The higher fuel subsidy may widen the state budget deficit.
Despite the rising oil prices, the central government could no
longer enjoy windfall profits as it did in the past, because
while it had to cover the rising fuel subsidy (Indonesia still
imports some of its crude needs), the government must also hand
over part of the oil revenue to the regions.

The government is currently revising the Autonomy Law and the
Fiscal Balance Law.