Govt reduces Pertamina's margin from fuel sales to PLN

The government has further reduces the amount of distribution costs and margin, called "Alpha", that state owned oil and gas company PT Pertamina can charge for the sale of fuel to state owned electricity company PT Perusahaan Listrik Negara (PLN).

Under the new pricing formula, PLN will buy fuel from Pertamina at 5 percent above the Mean Oil of Platts Singapore (MOPS) price reference.

The government earlier said that it would reduce the ?alpha? to six percent above the MOPS price reference from 9.5 percent at present.

Pertamina's Deputy Director of Commerce and Marketing Hanung Budya confirmed that the government had further reduced the "alpha", adding that Pertamina had no choices but to accept it although it could cause the company to suffer a loss from the sales of fuels to PLN.

However, Director General for Power Generation and Energy Utilizatin at the Ministry of Energy and Mineral Resources J. Purwono said that Pertamina would still be able to get a profit margin despite the cut in the alpha to five percent.

PLN has called on Pertamina to change the price formula since last year but it was rejected by Pertamina. PLN then launched a tender for the purchase of one million kiloliters of fuel to get cheaper prices. Shell, for example, won the tender to sell 850,000 kiloliters at only 3.75 percent above the MOPS price reference. (*)