State-owned energy company Pertamina needs to spend around Rp 800 billion to Rp 1 trillion ($70 million) this year to support the government’s single-price fuel scheme in 54 of the country’s most remote areas, a minister said on Monday (08/01).
The administration of President Joko “Jokowi” Widodo initiated the single-price fuel scheme in October 2016 to provide cheap, subsidized fuel in remote areas to help spur growth.
According to Energy and Mineral Resources Minister Ignasius Jonan, Pertamina needs as much as Rp 1 trillion to help fund logistical, operational and development costs to distribute the fuel in the country’s hard-to-reach districts.
Pertamina has been tasked with developing a total of 150 fuel distribution facilities by the end of 2019, estimated to cost about Rp 3.8 trillion in total. The government targets to offer the same fuel prices across the country at Rp 5,150 per cubic meter for subsidized diesel and Rp 6,450 per cubic meter for low octane “Premium” gasoline.
“[Subsidized] fuel products are very important, especially in the frontier, outermost and most remote areas, in which the disparity [with big cities] is pretty high. This is a three-year program as [reaching] the areas is not easy,” Jonan said in a press conference on Monday.
Since former President Susilo Bambang Yudhoyono’s administration, the government has continuously liberalized fuel distribution businesses to the private sector from, previously, Pertamina.
Last year, the state-controlled company, along with privately owned chemical distribution company AKR Corporindo, built a total of 57 fuel distribution facilities: Pertamina developed 54 of those facilities. In total, the new facilities have a combined distribution capacity of 48,000 kiloliters per year.
However, last year, distributors from Pertamina and AKR only distributed 11,000 kiloliters of Premium gasoline and 6,000 kl of subsidized diesel.
For the 2018-2022 period, the government has appointed Pertamina and AKR to procure subsidized fuel products in the country.