Pertamina finally decides to import LPG cylinders

Ika Krismantari, The Jakarta Post, Jakarta

State-owned oil and gas company Pertamina said Friday it would press ahead with its plan to import 4.2 million liquefied petroleum gas (LPG) cylinders this year, despite the opposition of the Industry Ministry.

Pertamina president director Ari Soemarno said Friday that the imports were needed to ensure that the government's conversion program to replace kerosene with LPG proceeded as scheduled.

He said that the company would invite bids later this month from overseas gas cylinder producers for the supply of the LPG cylinders as local suppliers were unable to provide sufficient numbers of the cylinders.

During the first year of the program, which was launched in the middle of last year, Pertamina, which is responsible for executing the program, needed at least 10 million 3-kg LPG cylinders for distribution free of charge to 6 million households in Greater Jakarta as an incentive to encourage families to make the switch from kerosene to gas.

However, the 11 local firms appointed by Pertamina to supply the gas cylinders will only able to produce about 5.8 million cylinders up to the end of this year.

In the light of this, Pertamina decided to import the rest so as to make sure that this year's part of program can be completed on schedule.

However, this was opposed by the Industry Ministry, which argued that by sourcing the cylinders from local industry, the kerosene-to-LPG conversion program would help Indonesian cylinder producers and create jobs.

However, Vice President Jusuf Kalla has backed Pertamina, saying that the firm's plan to import some of the cylinders was essential if the schedule was to be met.

Kalla had earlier said during a visit to cylinder and stove manufacturers in West Java that the program would not only benefit disadvantaged families, but also small-scale cylinder makers.

He said that every family could save up to Rp 25,000 (US$2.7) per month if it switched to LPG from kerosene.

As for the state, the program would help the government slash the cost of its subsidy on kerosene by up to Rp 22 trillion (US$2.5 billion) a year.

Last year, fuel subsidy spending amounted to Rp 60.5 trillion, of which Rp 40 trillion was spent on subsidizing the sale of 10 billion liters of kerosene for household use.

This year, the government expects to spend Rp 54.1 trillion on fuel subsidies. With rising oil prices, the government now estimates that total fuel subsidy spending will grow to Rp 90 trillion.