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NEWS UPDATES Asean Affairs   25 November 2010

Pertamina can thrive without fuel subsidy

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State-owned fuel provider Pertamina is saying it isn't worried about an impending decision by the government to limit subsidized fuel for private vehicles, and has in fact been preparing for such a move since 2006.

Pertamina enjoys a competitive advantage over private companies such as Shell Indonesia and Petronas as it is able to offer the lowest grade of gas, premium, at a subsidized rate.

But with the government now considering a plan either to prohibit all private cars from using subsidized fuel or ban all cars built in 2005 or later from using subsidized fuel, that advantage will be nullified.

Pertamina spokesman Mochamad Harun said the company was not perturbed by the possibility as it was ready to compete with private companies.

"The plan to limit subsidies will open up competition, and we're ready to face the competition," he said. "The challenge lies in increasing margins with such limited quotas."

He added that Pertamina's quality would top that of firms such as Shell Indonesia and Petronas.

"Since 2006, we have prepared various programs to improve quality, such as the slogan 'Pasti Pas' ['Certainly Correct']," he said.

"We're also increasing our Pertamax [higher-quality fuel] supply in Java, Bali and Sumatra."

Pertamina has in the past been criticized for poorly maintained gas stations and pumps rigged to overcharge customers.

In July, the company was forced to defend itself after thousands of vehicle breakdowns in Jakarta were blamed by some parties on the firm's premium fuel.

A following government investigation gave Pertamina's fuel a clean bill of health.

Harun said that of the two options currently being discussed by the government and the House of Representatives, Pertamina preferred limiting subsidized fuel for all private cars, saying it would be simpler to implement.

"Banning private cars manufactured in 2005 or later is more sophisticated since it involves identifying cars that are eligible for subsidized fuel, and that would be difficult," he said.

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