Govt seeks House approval to increase Pertamina's fee from fuel sales

The government is seeking an approval from the House of Representatives to increase distribution cost reimbursement and profit margin for the sales of subsidized fuels to around 14 percent from 8 percent at present.

The proposal was made during a hearing between the Ministry of Energy and Mineral Resources and the Commission VII of the House of Representatives in Jakarta on Wednesday.

Evita Legowo, the Director General of Oil and Gas, proposed that the distribution cost reimbursement and profit margin, which is better known as "alpha", be set at between Rp 693.5 and Rp 704 per liter (US$= Rp 11,700).

?If the Indonesian crude price ranges between $40 and $50 per barrel, the alpha will be Rp 693,5 per liter, and if the IPC is between $50 and $60 per barrel, the alpha will be Rp 704 per liter,? she added.

At present, Pertamina receives a 8 percent alpha. The state-owned oil and gas company has asked the government to increase the cost reimbursement and profit margin because with the sharp drop in fuel prices.

The increase in the alpha will cause an increase in the fuel subsidy. In the revised 2009 state budget, the government will subsidize the sales of 38.94 million kiloliters of fuel. This will comprises 20.64 million kiloliters of Premium gasoline, 5.8 million kiloliters of kerosene and 12.5 million kiloliters of diesel. (*)