Oilfields development
Not All Gas Stations in Indonesia Ready for Subsidy Cut, House Told
Reluctance by some gas station owners to invest in upgrading their tanks and pumps could scuttle government plans to prohibit private vehicles from using low-octane, subsidized fuel, an industry chairman said.
Eri Purnomohadi, chairman of the Association of Oil and Gas Entrepreneurs (Hiswana), spoke at a hearing of House of Representatives Commission VII, which oversees energy affairs. Of the 720 gas stations in the Greater Jakarta area, he claimed, 190 do not sell unsubsidized, high-octane Pertamax fuel and can only sell low-octane Premium and diesel.
“Investment to buy an additional fuel tank and pump for Pertamax is around Rp 400 million [$45,000],” Eri said on Tuesday, adding that gas station owners were hesitant to make the required investment. Starting on April 1, private vehicles registered in Jakarta and the surrounding area will be prohibited from buying subsidized fuel. Motorcycles and public transport vehicles will still be allowed to buy Premium.
“I am reminding the government that the readiness of gas stations for this scheme is not yet 100 percent. It is about 80 percent now. Of the 190 unprepared gas stations, 41 of them only have one fuel tank each for Premium and diesel,” Eri said.
He also said he was concerned consumers in Jakarta’s outer cities may suffer as the 530 stations that are ready for the switch are mostly located in the capital. Finance Minister Agus Martowardojo said on Monday that the plan, which the House and the government agreed to in December, must be implemented this year. Without the scheme, he said, fuel subsidies in the 2011 state budget would soar by 7 trillion.
The government set aside Rp 95.9 trillion in fuel subsidies in its 2011 budget, up from Rp 88.9 trillion in 2010. The allocation will cover 38.5 million kiloliters of subsidized fuel consumption, but the government claims consumption would rise to 40 million kiloliters without the restriction. Premium fuel costs Rp 4,500 per liter, while Pertamax costs Rp 7,950 per liter.
Kurtubi, an independent energy analyst, attacked the government’s plan, saying, “Ever since they announced this plan, we told them it is not rational.” He said the government’s attempt to save on subsidy spending would backfire with extra costs to make sure public transport drivers do not abuse the system.
“How can they ensure that angkot [minibus] or bus drivers do not buy Premium, stockpile it and re-sell it at a price that is slightly cheaper than Pertamax?” he said. “How much is the cost for such supervision. How will they do it — write down all the license numbers of buses and angkot?”
If the government wants to slash subsidies, he said, it could do so by raising Premium prices. Hatta Rajasa, coordinating minister for the economy, said last week that the government wanted to avoid hiking prices. Doing so in May 2008 sent inflation soaring into double digits.
