Govt to directly appoint subsidized fuel distributors

The government will directly appoint distributors of subsidized fuels for next year, rather than invite tenders as it did in the previous years.

Tubagus Haryono, the head of BPH Migas, the regulatory agency for oil and gas downstream sector, said in Jakarta on Wednesday that the government had decided to use a direct appointment system in selecting the distributors of the fuel for 2010 in order to avoid a lengthy tendering process.

?If we call for bids, the selection process will take at least six months,? he said.

He, however, said that companies interested in distributing subsidized fuels would be still required to submit proposals, specifying among others their financial commitment, fuel storage capacity, distribution networks as well as the expected profit margin.

Based on the proposals, the government would decide which company is qualified to distribute subsidized fuels in specific areas, he said.

The country will be divided into several distribution zones and companies were allowed to select their preferred zones in view of the availability of their fuel storage and distribution networks.

?By using a direct appointment system, we can get the names of distributors of subsidized fuels for next year by August this year,? he said, adding that the use of the direct appointment system is not in conflict with the existing regulation.

The Oil and Gas Law of 2001 allows the private sectors to distribute subsidized fuels on the domestic market and BPH Migas invited tenders annually to distribute the fuel. But, only Pertamina could meet the tough requirements set by BPH Migas in the auction.

Last year, at least 28 companies including Pertamina, PT Shell Indonesia, PT Petronas Patra Niaga, PT AKR Corporindo Tbk, PT Bumi Asri Prima Pratama, and PT Trans Pasific Petrochemical Indonesia (TPPI) took part in the tender.

But none of them, except for Pertamina, could meet the requirements regarding fuel storage capacities and distribution networks. Pertamina, which used to monopolize the domestic fuel market, has huge storage capacities and a nationwide distribution network. (bernard)