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New price formulas to determine govt fuel subsidies
New price formulas will be used to calculate the fuel subsidies the government will use to reimburse Pertamina.
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An attendant walks at a gas station belonging to state-owned energy holding company Pertamina in Kuningan, South Jakarta. (The Jakarta Post/Seto Wardhana)
T
hree new price formulas have been introduced that will help ensure that the prices of subsidized gasoline and liquefied petroleum gas (LPG) better reflect the state of the market and reduce the government’s subsidies for fuel sales.
The new formulas are for Solar, a subsidized diesel fuel sold by state energy holding company Pertamina; Premium, a subsidized low octant gasoline; and a subsidized 3-kilogram type of LPG.
Deputy Energy and Mineral Resources Minister Arcandra Tahar said the new formulas accounted for adjustments to production costs, distributor margins and transportation costs.
“We looked into the distribution costs, margins for fuel distributors, storage costs and procurement costs, and we found that the costs could be reduced to make [the process] more efficient,” he told journalists recently.
The formulas were issued earlier this April under energy and mineral resources ministerial decrees No. 61/2019 on the 3-kg price ceiling and No. 62 on fuel price formulas for Solar and Premium.
The new price formulas are based on a certain percentage of the relevant market reference price (HIP), plus the total production cost of the fuels. The HIP for Solar and Premium are based on the Mean of Platts Singapore (MOPS).
The price of Solar under the previous formula was set at 102.38 percent of the HIP plus a production cost of Rp 900 per liter (6 US cents). With the new formula, the price of Solar is set at 95 percent of the HIP, plus a production cost of Rp 802 per liter. Under the previous formula, the government’s subsidy for Solar was Rp 2,060 per liter, while under the new formula, the subsidy could be reduced to Rp 1,507 per liter, Arcandra said.
