Subsidized fuel consumption exceeds quota

Following soaring global oil prices in the first nine months of 2008, consumption of subsidized fuel exceeded the allocated quota by more than 3 million kiloliters (kl). 

State oil and gas company PT Pertamina, the sole distributor of the fuel, announced recently that consumption reached 39.40 million kl last year, higher than the earmarked quota of 35.54 million kl provided for in the state budget. 

The government provides subsidies for three oil-based fuels; Premium gasoline, diesel and kerosene, as well as the 3 kilogram containers of liquefied petroleum gas (LPG). 

Achmad Faisal, Pertamina's director for marketing and trading, said Premium consumption reached 19.61 million kl, higher then the 16.98 million kl quota, while consumption of diesel reached 11.89 million kl which also exceeded the quota of 11.00 million kl. 

Kerosene consumption reached 7.90 million kl, higher than its 7.56 million kl quota. 

Pertamina said the consumption of Premium and diesel exceeded the initial quota because of the increasing numbers of vehicle users which grew around 6 percent last year. 

"We predicted Premium and diesel consumption would surpass the allocated quota as happened in 2007," he said. 

Faisal added the over target consumption of subsidized kerosene during 2008 was due to Pertamina's decision to halt the kerosene-to-LPG conversion program during the Islamic fasting month of Ramadan. 

For 2009, the state budget has capped the subsidized fuel quota at 36.85 million kl -- 19.40 million kl for Premium, 5.80 million kl for kerosene and 11.61 million kl for diesel. 

Downstream oil and gas regulator BPHMigas said it expected that actual consumption would not exceed those forecast. 

"We will strengthen our supervision to avoid irregularities in subsidized fuel distribution. As the price gap between subsidized and non-subsidized fuels is narrowing, we expect to see less smuggling attempts and more use of non-subsidized fuel by motorists," BPHMigas chairman Tubagus Haryono said. 

He added BPHMigas had carried out feasibility studies in several cities to establish integrated gas distribution which was expected to help reduce oil-based fuel consumption. 

However, the agency has yet to implement this to promote greater energy efficiency in fuel consumption. 

Tubagus said the "Smart Card" program aimed at motorists purchasing subsidized fuels was unlikely to be implemented during 2009, as the agency was still making feasibility studies. 

Fuel subsidy and volume


2005 2006 2007 2008 2009*

Fuel and LPG subsidy 103.35 64.21 83.79 140.01 57.61
(in trillion rupiah) 

Volume 59.75 37.46 38.67 39.40 36.85
(in million kiloliters) 

*subsidy and quota stipulated in the 2009 state budget

Sources: Energy and Mineral Resources Ministry and Finance Ministry, Alfian, , The Jakarta Post, , Jakarta | Sat, 01/03/2009 10:33 AM | Business 

Based on the benchmark price of fuel MOPS It Right

The use of MOPS (Mean of Plats Singapore) by the Indonesian government to determine the price of benchmark price of Fuel Oil (BBM) in the country is right, this is not based on the conditions of the market price in the country so that the necessary reference price of the nearest market (border price). 

However disclosed Head of Law and Legislation Directorate General of Oil and Gas, Susyanto respond to the notification, which questioned why the government chose as the basic price of MOPS benchmark price of fuel in the country. He also said that the use of the MOPS price is relatively in line with the price index published other institutions (the International Energy Administration) and several other countries. 

See more: here

Businesses criticize cooking oil VAT cut

Businesses gave a cold response to a government plan to waive value-added tax (VAT) on up to 50,000 liters of unbranded packaged cooking oil each year, dismissing the amount as "too small" for the subsidy. 

The amount eligible for the subsidy was peanuts compared to the 80 million liters of unbranded cooking oil used each month by households and industry, Indonesian Vegetable Oil Producers Association (Gimni) executive director Sahat Sinaga said on Friday. 

"Ideally, the government should waive the VAT on 50,000 tons of unbranded cooking oil per month if it really wants to reduce burdens on the community," Sahat said. 

The government plans to waive VAT on several categories of goods including unbranded packaged cooking oil, to help keep prices in check, Trade Minister Mari Elka Pangestu said recently. 

At present, unbranded cooking oils sell for between Rp 9,000 (75 US cents) and Rp 10,000 per kilogram. 

"*Packaged* unbranded cooking oils eligible for the VAT cut are sold at traditional markets for prices within consumers' reach," Mari told members of House Commission VI (which oversees industry, trade, state-owned enterprises, cooperatives and small and medium enterprises). 

The government plans to phase out sales of unpackaged cooking oils, which it hopes to replace with packaged unbranded cooking oils, Trade Ministry domestic trade director general Subagyo said recently. 

"In future, we hope, unbranded packaged cooking oils will be slightly more expensive than unbranded unpackaged cooking oils, but cheaper than branded cooking oils," Subagyo said. 

The unbranded packaged cooking oils the government plans to promote would be labeled Minyak Goreng Sawit or MGS (palm oil for cooking), Subagyo added. 

In a bid to stabilize cooking oil prices, Sahat said, state logistics firm Bulog was working with businesses to market unbranded packaged cooking oils. 

MGS cooking oil would be sold in 500-milliliter, 1-liter, 5-liter and 18-liter packages, said Indonesian Cooking Oil Industry Association chairman Adiwisoko Kasman (also involved in the marketing venture). 

"We are now processing licenses with BPOM *Food and Drug Food Monitoring Agency* and MUI *Indonesian Ulema Council*, prior to the launch scheduled for January 2009," Adiwisoko said.

source: Mustaqim Adamrah, , The Jakarta Post, , Jakarta | Sat, 12/06/2008 11:40 AM | Business 

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