Pertamina will not lower LPG sale prices

The president of state oil and gas company Pertamina, Baihaki Hakim, said on Tuesday that Pertamina would not cancel its decision to raise the sales prices of its liquefied petroleum gas (LPG) despite public oppositions, contending that Pertamina was suffering losses from the LPG businesses due to low prices.

"Pertamina has suffered losses of up to 1.5 trillion (from LPG business). So, it's impossible for us to lower prices," Baihaki told reporters after meeting with President Abdurrahman Wahid at Bina Graha presidential office.

Baihaki contended that LGP was not subsidized by the government, and therefore, Pertamina must set the prices according to market demand. He noted that the price of LPG was closely influenced by crude oil prices that are currently rising high.

"The increase in our PLG sales prices is influenced by the rising prices of crude that we buy as raw material for LPG. Thus, if crude oil prices rise, LPG will rise also," he said.

Baihaki promised to explain cost structure of its LPG business to the House of Representatives' Commission VIII on mining and energy at a hearing slated this coming Thursday.

On Nov. 2, Pertamina raised LGP sale price from Rp 1,500 per kilo - which has been in effect since 1998 - to Rp 2,100 a kilo. With the new increase, the people would now have to pay around Rp 25,500 to Rp 26,000 per tube of 10 kilogram LPG, from Rp 19,500 to Rp 20,000 before the increase.

A number of parties have lambasted Pertamina for raising the LPG prices. The Indonesian Consumers Foundation (YLKI), for instance, protested the government-sanctioned Prices Supervisory Team for breaking its earlier promise that the fuel price increases would not be followed by price increases of other commodities.

"We have sent letter to the Prices Supervisory Team," YLKI deputy chairman Agus Pambagio, adding that the team led by the director general of domestic trade at the Ministry of Industry and Trade did nothing to stop Pertamina from raising LPG prices. (*)