Pertamina ready to meet demand for new gasoline

The Jakarta Post, Jakarta

Following the government's plan to sell better quality gasoline to partially replace the sales of the heavily-subsidized Premium brand gasoline in the first quarter, next year, state-owned oil company Pertamina said it would be ready to meet the demand of the new gasoline.

Pertamina's head of communication division, Wisnuntoro, said here late Wednesday the firm would begin to produce 40,000 kiloliters of the 90-octane gasoline per day in January at its refineries in Plaju, Palembang, South Sumatra, and in Balongan in Indramayu, West Java.

The government has planned to sell the highly subsidized gasoline only to public vehicles and motorcycles from the first quarter of next year in order to reduce growing fuel subsidies.

Private cars would be allowed only to buy a better quality 90-octane gasoline, which would be sold at about Rp 6,250 per litter, with a subsidy of Rp 500 per liter.

At present, Premimium brand gasoline, which has 88 octane content, sells at Rp 4,500 a liter, with a subsidy of about Rp 2,500.

State Minister for National Development Planning Paskah Suzetta said from the reduction of the Premium sales in Jakarta alone, the government could cut the fuel subsidy by Rp 6 trillion a year (US$647.88 million).

Paskah said private vehicles in the Greater Jakarta area used almost two million kiloliters of Premium gasoline per year, or about 40 percent of national Premium gasoline consumption.

Director general of oil and gas at the Energy and Mineral Resources Ministry, Luluk Sumiarso, said the government would first try to replace Premium gasoline with 90-octane gasoline in gas stations in Greater Jakarta main thoroughfares, tollways and elite housing complex areas.

After Greater Jakarta, the government is considering to implement the program in Batam, Bali and Banten areas, also in 2008.

The same implementation will be carried in Surabaya area, East Java, and Semarang area, Central Java, in 2009, as well as Sumatra, Kalimantan and Sulawesi regions in 2010.

The Indonesian government has allocated Rp 45.8 trillion (about US$4.9 billion) in fuel subsidies in 2008. The subsidy for the Premium gasoline alone is expected to reach Rp 7.87 trillion.

A senior government researcher said here Thursday the plan to limit the sales of Premium gasoline to public vehicles and motorcycles would have a lesser impact than if the government raised the prices.

Indonesian Institute of Science (LIPI) researcher Maxensius Tri Sambodo said there would be inflation, people resistance and poor government control shortly after the plan was implemented.

He said however it would bring less impact than the fuel price hike made in October, 2005.

"If it is implemented, the government's new fuel plan will have lesser risk rather than if it raises the prices like the one in 2005," Maxensius told The Jakarta Post.

He said the inflationary pressure from the new fuel policy would not as big as 2005 because under the new plan public vehicles would be still allowed to buy fuel with a big subsidy.

The government raised the fuel prices including diesel and kerosene by an average of 100 percent in October to reduce the swelling subsidy. The rise caused an increase in the annual inflation rate to 17 percent in 2005, much higher than between 6 and 7 percent in the previous years.

According to a survey conducted by Maxensius and his LIPI team, the fuel hike in 2005 hit the transportation sector more seriously than others.

"Compared to fishery and SMEs, transportation suffered more as transportation operators must raise their fares, which caused a decline in the number of passengers, therefore they earned less compared to the previous years," he said.(adt/nkn)