Observer: Government should review expansion coverage of cheap gas price for industry

Secretary General of the Association of Oil and Gas Companies (Aspermigas), Elan Biantoro and Executive Director of the Reforminer Institute, Komaidi Notonegoro, talk about the cheap gas price policy on CNBC Indonesia’s Energy Corner, Tuesday (8/8). (Hartatik)

Jakarta – Reforminer Institute Executive Director Komaidi Notonegoro has called on the government to rethink its efforts to improve industrial competitiveness and not just focus on cheap gas prices.

According to him, expanding domestic gas use to boost the national economy is a positive step along with the plan to stop natural gas exports. However, the government must still work on investment issues, limited infrastructure and domestic gas uptake to stop natural gas exports.

“There are many factors to improve the competitiveness of Indonesian industries such as licensing, raw materials, skilled labour and competitive machinery. So it’s not just the price of gas,” said Notonegoro on CNBC Indonesia’s Energy Corner programme.

The government lowered the price of natural gas to an average of USD 6 per MMBtu starting 1 April 2020. This subsidy is financed, among others, through a reduction in the allocation of State Revenue from natural gas so that the gas industry can get competitive gas prices and grow optimally.

Based on a study by the Reforminer Institute, the government’s efforts to improve industrial competitiveness by reducing gas prices to USD 6 per MMBtu three years ago have not impacted.

Furthermore, Notonegoro agrees that relative competitiveness can increase if gas prices are cheap, but the government also needs to look at the leverage. He is worried that the expansion of cheap gas coverage for the industrial sector will not be on target and could compromise the oil and gas investment climate.

“This is reflected in the fact that gas uptake by industry has not been optimal according to the allocation set. Even though the state’s sacrifice for this policy is very large, because it has to lose non-tax state revenue (PNBP) of up to Rp 30 trillion in the last three years,” explained Komaidi.

Secretary General of the Association of Oil and Gas Companies (Aspermigas), Elan Biantoro, at the same event added that implementing the cheap gas policy for industry needs to be regulated so that not only one party benefits or suffers.

According to him, the government’s plan to expand the scope of industrial sectors that get cheap gas price facilities will be implemented in stages, and a transition period will be prepared. This is done to avoid problems in the future and to create a domino effect for the economy. (Hartatik)

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