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tate-owned oil and gas company PT Pertamina is going ahead with its plan to increase the price of non-subsidized 12-kilogram liquefied petroleum gas (LPG) canisters to a price that will be announced in January.

The price increase is part of the company'€™s efforts to reduce the massive losses incurred by its LPG-distribution business.

Pertamina marketing director Ahmad Bambang said the new price would likely be announced within the month.

'€œThe increase will be in line with the initial planned increase of Rp 1,500 per kilogram,'€ Ahmad said.

Increasing the price of 12-kg LPG canister to its actual economic value is part of Pertamina'€™s long-term strategy to boost its downstream businesses. Considering the public'€™s purchasing power, Pertamina is currently selling the canister far lower than its economical price, although it gets no subsidy from the government.

In the last five years, Pertamina suffered Rp 17 trillion (US$1.4 billion) in total losses from sales of the canisters.

Therefore, the company is planning to increase the canister'€™s price every six months to finally reach its actual value in 2016. In 2014, Pertamina twice increased the price, in January and again in September.

Pertamina currently sells the canisters to agents for Rp 114,300 per unit.

Given the current weakening gas reference price, Pertamina would only need to increase the canister price once more for it to reach the actual economic value. The reference price is based on the Saudi Aramco contract price (CP), which has been declining in line with the decline in global oil prices.

'€œA further increase is still necessary despite the weakening CP Aramco because Pertamina continues to make a loss from the sale of 12-kg LPG canisters. As a company, we cannot let losses continue,'€ he said.

Ahmad pointed out that during the January-November period of 2014, Pertamina incurred losses of $340 million from the 12-kg LPG canisters business. The company estimates that the full-year loss will be around $390 million.

The country'€™s total LPG consumption is 6.5 million tons per year, of which around 5.3 million tons is in 3kg canisters and the remaining 1.2 million tons in 12-kg canisters. The issue of the price of the latter is sensitive, although the central bank has said that increases in its price would contribute little to inflation.

Pertamina, the biggest dividend payer to the government, expects that a healthier 12-kg business will increase its profits and boost its financial health.

Finance director Arief Budiman said the firm projected that its revenue would reach $70 billion while profit was estimated to touch $2 billion in 2014. The firm, he said, was targeting 10- to 15- percent growth in its top and bottom lines in 2015.

In line with the government'€™s policy of encouraging the use of gas in the domestic market to reduce dependency on oil-based fuel, Pertamina has also been trying to boost its downstream gas business, including the distribution of gas for transportation and electricity.

The growing LPG usage in the country has been particularly driven by the government'€™s kerosene-to-gas conversion program introduced a few years ago.

Pertamina director for new and renewable energy Yeni Andayani said the company would continue to focus on the development of gas infrastructure in 2015 to support the wider-gas-utilization plan.