Govt to tighten up subsidized LPG distribution, BPH Migas in the dark

Alfian , The Jakarta Post , Jakarta | Fri, 07/04/2008 11:08 AM | Business

The government will increase supervision of subsidized LPG distribution over fears the recent price increases in non-subsidized LPG might encourage ineligible people to unfairly enjoy subsidies, a minister says.

"Supervision is important in this case. The 12-kilogram LPG (liquefied petroleum gas) tanks are designated for the middle class.

"It will be a violation if these people switch to consume the subsidized three-kg cylinders, which are meant for the lower class," Energy and Mineral Resources Minister Purnomo Yusgiantoro said Thursday.

Of Indonesia's total annual LPG consumption of 1.1 million tons, 13 percent is packaged in 50-kg tanks, 75 percent in 12-kg tanks and the remaining in three-kg tanks.

The government only subsidizes the three-kg LPG tanks.

Purnomo said downstream Oil and Gas Regulator BPH Migas and his ministry's director general for oil and gas would work together to increase supervision.

State oil and gas company PT Pertamina raised on July 1 the price of a 12-kg LPG cylinder by 23 percent to Rp 5,250 per kg from Rp 4,250 per kg. The price of a 12-kg LPG tank rose from Rp 51.000 to Rp 63.000.

Pertamina says the retail price hike for LPG was down to the rises in global LPG prices and the increasing operation and distribution costs caused by the rise in fuel prices.

The retail price for subsidized three-kg LPG is maintained at Rp 4.250 per kg. In September last year, Pertamina raised the price of a 50-kg LPG tank by 46 percent to Rp 6,200 per kg from Rp 4,250.

When contacted, BPH Migas said the supervision of LPG lay beyond its sphere of authority.

"The regulations stipulate that BPH Migas is responsible for supervising fuels, both subsidized and non-subsidized, and pipeline gas. Thus, supervision of LPG is beyond our domain," said Yugi Prayogo, acting chairman of BPH Migas.

"If the minister orders BPH Migas to perform the supervision, we will await the new legal basis for this," Yogi said.

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