Rp 9.7t in subsidized fuel lost last year
Urip Hudiono, The Jakarta Post, Jakarta
The Supreme Audit Agency (BPK) has found that at least one-eighth of last year's Rp 80.42 trillion ($7.99 billion) in subsidized fuel, or Rp 9.7 trillion, was lost due to smuggling and that the total subsidy itself may have been overestimated by Rp 3.64 trillion.
Speaking after submitting the results of the BPK audit of last year's fuel subsidy to the House of Representatives on Monday, BPK chief Anwar Nasution said the findings were the outcome of a prolonged failure on the part of the government to determine precisely the exact demand and supply of fuel in the country, as well as to protect the subsidized fuel from rampant distribution irregularities and misuse.
"The subsidy policy has caused a disparity in fuel prices -- particularly that of kerosene and diesel fuel -- resulting in unscrupulous parties trying to reap illegal benefits from the subsidized fuel," he said.
Following a request from the House in February, BPK had conducted a four-month audit from April to August on last year's fuel subsidy, focusing on the country's production of crude oil and refined products, the production cost of refineries and the distribution of the subsidized fuel.
The audit was complemented by a study by University of Indonesia's Institute for Economic and Social Research (LPEM-UI) on the effectiveness of the fuel subsidy.
In its study, LPEM-UI revealed a mismatch of some 8 million kiloliters of fuel worth Rp 9.7 trillion, between the sales data of fuel from state oil and gas firm PT Pertamina and the full- year estimate of domestic fuel consumption, concluding that it had been lost through smuggling out of the country.
The government, in this case the finance ministry, disburses the fuel subsidy through Pertamina, which still acts as the country's main fuel distributor.
LPEM-UI also concluded that 3.9 million kiloliters of diesel fuel valued at Rp 4.5 trillion had been smuggled last year alone -- while some 1.7 million kiloliters of kerosene valued at Rp 3.5 trillion vanished on the way to low-income households, its targeted consumers.
"Being the most flexible type of fuel in terms of its usage, large amounts of kerosene had been misused, particularly for illegal fuel mixing," LPEM-UI said in its report.
BPK found that last year's total subsidy might have been over- disbursed by as much as Rp 3.64 trillion, with Anwar deploring the fact that Pertamina did not have a definite system to calculate its fuel production cost, resulting in the obscure subsidy costs and disbursement.
"It is embarrassing that such an old and big company as Pertamina does not have a method to make an exact calculation," he said.
The government and Pertamina only acknowledged a revision of Rp 936 billion to the subsidy, arguing that the additional Rp 2.71 trillion was for Pertamina's domestic market obligation costs.
BPK has calculated in its audit that the production cost of kerosene stands at Rp 2,545 per liter, diesel at Rp 2,588 and Premium gasoline at Rp 2,750. The fuels are currently sold at Rp 2,000, Rp 4,300 and Rp 4,500, respectively, after the latest fuel price hike on Oct. 1.
Anwar also highlighted the weak supervisory system at both Pertamina and the government's Upstream Oil and Gas Regulatory Body (BP Migas), resulting in the failure to save up to Rp 480 billion in the fuel subsidy each year.