Pertamina announces new LPG price rise

The Jakarta Post , Jakarta | Thu, 08/30/2007 1:51 PM | Business

Ika Krismantari, The Jakarta Post, Jakarta

Starting Sept. 1, state-owned oil and gas firm PT Pertamina will raise the price of liquefied petroleum gas (LPG) by 46 percent to Rp 6,200 (66 U.S. cents) per kilogram in an effort to help improve the performance of its LPG business division.

The price stands currently at Rp 4,250 a kg.

However, the price increase will only be applied to LPG sold in tanks with a weight of 50 kg, said Pertamina deputy director for marketing and trading Hanung Budya on Wednesday.

According to Hanung, the company suffers losses of up to Rp 2 trillion per year by placing the LPG price under the market price of Rp 7,200 per kg. Therefore, every year the company has to allocate subsidies for LPG consumers so that people can afford the product.

""That's why the price rise will only be imposed on LPG sold in a 50kg-tank. The users of this category are those in the commercial sector, including hotels, restaurants and hospitals. The subsidy for them will be pushed down over time.

""I do not think they deserve the subsidize facility anymore,"" Hanung said.

He added that Pertamina had decided to still give a subsidy to LPG sold in 12kg-tanks, as it is used widely in households. ""We will not raise the price for this category.""

Hanung added that the company planned to eliminate the subsidy completely in the near future so that the product could be sold at least on par with the current market price.

Of Indonesia's total LPG consumption of 1.1 million tons, 50kg tanks account for 13 percent, while 12kg tanks make up 75 percent.

In addition to that package, the company also sells LPG in 3.5kg-tanks under a government-initiated conversion program aimed at gradually replacing the usage of kerosene in households with LPG.

To promote the program, the government has decided to allocate Rp 2.4 trillion in the 2008 state budget bill to provide free gas stoves and LPG cylinders.

Pertamina director for trading and marketing Ahmad Faisal said that should the program run well, as the country's demand for LPG is expected to increase by almost six times to 6 million tons per annum.

In securing the supply, Faisal said the company was in talks with some LPG producing countries, such as Australia and Middle Eastern countries.

Faisal expects the company will able to secure additional 1 million tons of LPG from gas giant BP and 1.5 million tons from United Arab Emirates.

Comments (0) | Post comment

A | A | A |