Government lowers gas price for certain industries

President Joko Widodo (Jokowi) has finally issued Presidential Regulation No 40/2016 on lower gas price for certain industries including fertilizer, petrochemical, oleo chemical, steel, ceramics, gloves, and glass.

The Cabinet Secretary said in a statement Wednesday that the president signed the new regulation on May 3, but the lower gas price is retroactive as of January 1, 2016. The new policy is expected to help accelerate growth of the industries, it added.

According to the new regulation, the minister of energy and mineral resources will determine the new gas price if the current price is deemed not economically feasible for the aforementioned industries or exceeds US$6 per mmbtu.

Minister of Energy and Mineral Resources Sudirman Said declined on Wednesday to disclose the size of reduction in the gas price, but Bisnis Indonesia estimated it will decline by $1-$2 per mmbtu.

Director General of Oil and Gas at the ministry IGN Wiratmaja Puja said that while the new policy would lower state revenue, it would not affect the upstream producers as the price reduction will be shouldered by the government.

Minister of Industry Saleh Husin and industry leaders welcome the new policy as it would help cut down production costs and improve their competitiveness level.

Editing by Reiner Simanjuntak