September 4, 2008

Subsidy Miscalculation By State Oil Firm Costs Indonesia 830m Dollars

Text of report in English by influential Indonesian newspaper The Jakarta Post English-language website on 3 September

[Unattributed article: "State suffers Rp 7.63 t from subsidy miscalculation"]

The state suffered IDR 7.6 trillion (USD 830 million) in losses in 2006 and 2007 due to an oil and gas subsidy miscalculation by state-owned PT Pertamina, according to the State Audit Agency (BPK).

On Wednesday [3 Aug 08], BPK Chief Anwar Nasution said Pertamina had been using a pricing formula that was not in line with the 2005 presidential regulation on oil price benchmarks.

The regulation states that the price of subsidised goods (JBT) has to be based on the average price of the commodity a month before a new purchase is made.

"The problem arose when Pertamina interpreted 'a month before' to mean a month before claiming payment (to the government)," Anwar told lawmakers in the first hearing of a People's Representative Council (DPR) investigation into oil subsidies.

The DPR ran the investigation based on a series of inefficiencies in the management of the country's oil and gas supply, particularly in the process of importing oil for domestic consumption, in the implementation of cost recovery mechanisms, and in oil and gas purchasing contracts.

The misinterpretation, he said, led the state to pay more for oil subsidies. Anwar said the excess reached IDR 1.08 trillion in 2006 and IDR 6.55 trillion in 2007.

The BPK discovered there had been excesses in the volume of other subsidised goods distributed by Pertamina. Excesses in the distribution amounted to IDR 88.65 billion in 2006 and IDR 48.94 billion last year.

Anwar said the oil distribution errors might involve criminal conduct and the agency had issued a letter to alert the National Police (Polri). The police responded to the letter by exposing its findings on 26 August.

"The distribution of diesel JBT, with a total volume of 6.25 million litres, used a bunker ship operating with a fake permit," he said.

Originally published by The Jakarta Post website, Jakarta, in English 3 Sep 08.

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