Price of subsidized fuels set by Pertamina too high: LP3ES

The prices of subsidized fuels for the period of between December, 2005 and March 2006 set by state owned oil and gas company Pertamina were generally higher than the formula set by the government, according to a study conducted by LP3ES social and economic research institute.

LP3ES said the wrong pricing has caused losses to the state of at least Rp 12 trillion during the period.

"The price of subsidized fuel for the period of January to May should have been lower by between six and nine percent. It means that the subsidy that should be paid by the government to Pertamina should be lower," the head of research department at LP3ES, Pri Agung Rakhmanto said.

According to the formula set by the government, the price of subsidized fuels is calculated based on the average fuel prices under Mid Oil Platt's Singapore (MOPS), plus 15 percent for insurance, and distribution costs.

Based on such as formula, the prices of subsidized fuels such as Premium, diesel oil and kerosene set by Pertamina from December to March were between six and nine percent higher.

He said that the price of Premium fuel for January should have been Rp 4,338 per litter not Rp 4,500.

According to Pri Agung, the calculation made by LP3ES was based on prices on spot market. "If it is calculated using contracted prices, the prices should be even lower," he said.

Meanwhile Pertamina's head for fuel division, Djaelani Soetomo said that LP3ES came with different price outputs because the formula it used was different with Pertamina.

According to him, Pertamina had strictly used the formula set by the government in calculating the fuel prices. (godang)