Negotiations on gas prices for fertilizers remain tough

Negotiations over gas prices for state-owned fertilizers producers remain tough as each government departments representing the opposing sides maintain their positions, according to an informed source.

The source said that the Ministry of Finance (MOF) maintained a proposal from the Ministry of Energy and Mineral Resources that gas prices should not be cut to below $1.60 per Million British Thermal British_Thermal_Unit (MMBTU). It did not want to cut the prices further down because it would affect state budget.

Meanwhile, the Ministry of Industry and Trade, representing the interest of fertilizer producers, insisted that gas prices must be cut down to $1.30 from the current level of about $1.85 per MMBTU. With such low natural gas prices, it is expected that it would encourage the development of domestic gas-based industries.

"The Ministry of Industry and Trade will study the impact of the Ministry of Finance's position for companies using gas as their supporting raw materials," the source said.

The unresolved issue of gas prices had stalled the planned privatization of fertilizer firm PT Pupuk Kaltim in East Kalimantan.

The company has initially planned to conduct a road show of its privatization plan early this month, but it cancels the plan because it could not yet make financial projections due to unresolved gas prices issues.

The director general of chemical industries, agro and forest products at the Ministry of Industry and Trade, Gatot Ibnu Santosa, said that his party and fertilizers industries wanted a low gas prices so that they could maintain fertilizers prices at the current level.

Nevertheless, Gatot said that his p arty and fertilizers firms would calculate the consequences of gas prices to fertilizer industries and farmers as end users of fertilizers.

He said they would use different gas prices as an assumption, starting from $1.85, $1.60 and $1.30 per MMBTU, and see the impacts on industries and farmers. (*)