Govt studies reduction of Pertamina?s margin on subsidized fuel

The government is studying the possibility of reducing margin of state oil and gas company PT Pertamina reflected in the amount of margin in the formula of subsidized fuel price in bids to reduce subsidy and to prevent a move to increase fuel price.

Director General for Oil and Gas at the Ministry of Energy and Mineral Resources Luluk Sumiarso said that the 1 percent margin reduction was estimated to save subsidy of up to Rp1.7 trillion.

The formula on the prevailing subsidized fuel price has been set based on the price of the mid oil plats Singapore (MOPS) plus Alpha. The Alpha comprises major cost, distribution cost and the profit that Pertamina expected to gain.

Based on this year?s state budget, the agreed margin for Pertamina is 14.1 percent.

Luluk asserted that up till now, government had no attention to increase the sale price of subsidized fuel. ?We strive to seek an opportunity to reduce the subsidy but without raising the sale price, such as by intensifying safe energy or energy diversification drives,? he said.

Luluk also said that the government would give an opportunity for foreign companies to take part in providing and distributing subsidized fuels in a limited amount starting next year.

The downstream oil and gas regulatory body BPH Migas would invite all private companies involved in providing and distributing subsidized fuels next year provided that they meet requirements, namely operating several retail fuel stations in two commercial areas, he said.

He, however, said that distribution fee charged by private companies should be lower than that of Pertamina, which had been the sole distributor of the subsidized fuel.

Currently, Royal Dutch Shell and Malaysia?s Petronas have opened several retail fuel stations in Jakarta greater area but they have yet to distribute the subsidized fuel. (godang)