Stop selling subsidized fuels to industries

Downstream oil and gas regulator BPHMigas has ordered state oil and gas company PT Pertamina not to sell subsidized fuels to industries any more to ensure that the use of the subsidized fuels would not exceed the limit.

BPHMigas committee member Adi Subagyo said a 2006 presidential decree had actually prohibited the use of subsidized Premium gasoline and diesel by industry vehicles. He argued that the 2006 regulation was not properly implemented due to lack of available infrastructure, so there were some cases where fuel was not easy to obtain at normal prices.

“We still tolerate that industries buy the subsidized fuels, because Pertamina’s infrastructure for non subsidized fuels is not available in some regions. We cannot prohibit them from buying the subsidized fuels, when the alternative fuels are not available,” Adi said Sunday.

“But, this cannot be tolerated anymore as the consumption of subsidized fuels now almost exceeds the ceiling. We have asked Pertamina not to sell subsidized fuel to industries when the consumption exceeds the quota,” he added.

According to BPHMigas, subsidized fuels are still commonly used for industrial transportation, including vehicles, trains, and heavy equipment at mining installations, power plant, and in construction industries; also by cargo ships and even yachts.

“We estimate that industries consume not less than 15 percent of the subsidized fuel quota,” Adi said.

He added that as for the cargo ships and yachts, industries still consumed the subsidized diesel even though the infrastructure for the non-subsidized fuels was available.

“Actually, Marine Fuel Oil [MFO] meets the ship’s specification more than the subsidized diesel, but industries prefer to buy the subsidized diesel due to price disparity between them,” he said.

An Energy Analyst from ReforMiner Institute Pri Agung Rakhmanto said ships were able to use the subsidized fuels because government regulations were unclear.

“The 2006 presidential decree states that Indonesian-flag ships may use the subsidized fuels. On the other hand, the adoption of the cabotage principle requires all ships in Indonesian waters must be Indonesian-flag vessels,” Pri Agung said.

He added that the presidential decree must be revised to make the regulation clearer.

Adi said that BPHMigas acknowledged the decree was still interpreted differently by industry and, therefore, it would be revised. But, while waiting for the revision, BPHMigas must take some action to control the consumption of subsidized fuel for this year.

Law No.22/2010 on the 2010 revised state budget caps the consumption of subsidized Premium gasoline at 21.43 million kiloliters and subsidized diesel at 11.19 million kiloliters. As of August, BPHMigas recorded the consumption of the subsidized Premium has reached already 14.95 million kiloliters or 69 percent of the quota and that of diesel has reached 8.52 million kiloliters or 76.07 percent of the quota.

Meanwhile, Coordinating Economic Minister Hatta Rajasa said last week that the government would further improve control over the distribution of subsidized fuels.

“By tightly controlling supplies at fuel tanks, we could save 800,000 kiloliters of subsidized fuel,” he said.

“We should also tighten the monitoring of subsidized fuel distribution to avoid its misuse and leakage,” Haatta told journalists after a coordination meeting at his office.

The government previously revealed its plan to restrict the consumption of subsidized fuel for fairer and better-directed subsidy distribution processes by, among other measures, prohibiting private cars produced in 2005 and afterwards to consume subsidized fuel. (ebf)