PGN and ceramic tile makers agree to end price dispute

State owned gas distribution company PGN and ceramic tile producers, the main buyers of its gas, agreed on Thursday to settle the dispute over the increase of the price of the gas sold to the ceramic tile producers, Investor Daily reported on Friday.

Under the agreement, the ceramic tile producers accept the 15 percent increase in the gas proposed by PGN. However, the ceramic tile producers are allowed to pay part the price increase next year.

PGN's President Director WMP Simanjuntak said in Jakarta on Thursday that the ceramic tile producers had agreed a 15 percent increase in the gas price to US$4.5 per million British thermal unit (mmbtu) from US$3.9 per mmbtu previously.

Simanjuntak said from October to December, this year the ceramic tile producers were required only to pay the rental fee for the pipeline at Rp 295 per meter instead of Rp 450 per meter. "They are allowed to install the payment of the remaining Rp 155 per meter for six months beginning in January next year.

"With such incentive, the increase in the gas price this year is only about 10 percent," he said. PGN's agreement with the ceramic tile producers was made following protests from industries and government over the company's price increase.

Simanjuntak said that ceramic tile produces had also agreed on an additional 2.2 percent increase in the gas price from January to June, next year to US$4.6 per mmbtu from US$4.5 per mmbtu at present, and another 8.7 percent increase beginning in July to US$5 per mmbtu.

He said that the new prices were still relatively cheaper than the oil prices. According to him, the gas price of US$4.6 per mmbtu is equivalent to Rp 1,700 per liter of diesel oil, and the gas price of US$5 per mmbtu is equivalent to Rp 1,950 per liter of diesel oil. Diesel oil now costs Rp 6,000 per liter for industrial buyers.

PGN's agreement with the ceramic tile producers was made following protests from industries and government over the company's price increase

Last week, Chief Economic Minister Aburizal Barkrie strongly protested the decision made by PGN to raise its gas prices, saying that the price increase would severely hurt industries. Speaking to reporters last week, Aburizal said, PGN had no reason to increase the price because gas suppliers had yet to increase their prices to the state owned gas distribution company. (*)