February 6, 2015 / 1:50 PM / 4 years ago

Indonesia to set price band for domestic fuel prices - official

JAKARTA, Feb 6 (Reuters) - Indonesia plans to set a floor and ceiling on fuel prices in a bid to reduce volatility and generate savings, an energy official said, just over a month after Southeast Asia’s largest economy axed fuel subsidies.

Last month President Joko Widodo freed up $20 billion of dollars of state spending in 2015 by scrapping fuel subsidies and adopting a managed float, whereby retail petrol prices are set based on the average crude prices over the preveious two weeks.

“If crude prices go down we will set a floor price so we will have savings. We will do the same if prices go too high, we will also set a ceiling price,” Wiratmadja Puja, acting director general of oil and gas, told reporters on Friday.

The government had carried out a study on what levels the floor and ceiling would be set at but was not ready to release the details yet, Wiratmadja said.

“If crude prices reach Rp 12,000 ($1) per litre or Rp 15,000 per litre, it’s not good for people,” he said, adding the government planned to discuss the issue of subsidies again with parliament.

The government is also working on plans to develop 30 days worth of strategic fuel reserves, Wiratmadja said.

These would be in addition to the increase in operational reserves and storage capacity — from 22 days at present to 30 days as well — that state energy firm Pertamina hopes to develop over the next five years.

“The budget will definitely be provided by the state, but the study is ongoing,” Wiratmadja said. “These calculations will be used to build storage and fill it with petroleum reserves.”

Earlier this week, Energy Minister Sudirman Said said Indonesia may use savings from fuel sales to help pay for strategic reserves.

“If oil prices continue to decline it doesn’t mean we will keep following them down because the discount or savings we get we can use to develop national reserves,” Said told reporters.

Pertamina, which supplies the vast majority of Indonesia’s fuel needs, is saving around 200 rupiah (just under 2 U.S. cents) on each litre of Premium (RON88 gasoline) sold, oil and gas director general Wiratmadja Puja told Reuters, adding up to around 16.2 billion rupiah for the 81 million litres of Premium sold daily, according to Reuters calculations.

$1 = 12,611.0000 rupiah Writing by Fergus Jensen; Editing by Mark Potter

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