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Thursday, April 22, 2021 | 15:15 WIB

Former president of the Federation of Pertamina United Labor Unions Ugan Gandar taking oath before testifying at the virtual judicial review hearing of Law No. 19 of 2003 on SOEs, Thursday (22/4/2021). Photo by Humas MK/Ifa.

JAKARTA, Public Relations—Restructuring of PT Pertamina is a consequence of the enactment of Law No. 22 of 2001 on Oil and Gas (Migas). However, the restructuring by the Government by building holdings and sub-holdings means their stocks are no longer controlled by the state, said Ugan Gandar, former president of the Federation of Pertamina United Labor Unions (FSPPB) at the virtual judicial review hearing of Law No. 19 of 2003 on State-Owned Enterprises (BUMN/SOEs).

The eighth hearing of case No. 61/PUU-XVIII/2020 was held by the Constitutional Court on Thursday, April 22, 2021 for the testimony of the Petitioner’s witness. In its petition, FSPPB challenges the provision on privatization in Article 77 letters c and d of the BUMN Law against Article 33 paragraphs (2) and (3) of the 1945 Constitution.

“Restructuring of Pertamina into holdings and sub-holdings, the next step of which is to conduct [initial public offering/IPO] for its core businesses such as PT Pertamina Hulu Energi, PT Geothermal Energi, PT Pertamina International Shipping, PT Pertamina Power Indonesia, PT Pertamina Lubricants, and so on. Of course, those companies’ stocks will no longer be completely controlled by the state,” said Ugan before the panel chaired by Chief Justice Anwar Usman.

Also read: Constitutionality of Privatization of Pertamina Subsidiaries

Minority Stockholders

Ugan explained that in sub-holdings, there are minority stockholders. The state cannot arbitrarily make policies without taking these stockholders into account because the law protects their positions in a limited liability company (PT). Therefore, he added, the consequence of these sub-holdings is tax obligation each time assets or products are transferred, administrative bureaucracy, etc.

“Those sub-holdings could be controlled by a holding, but those business entities have each of their own legal mechanisms, upstream to downstream, which makes them not integrated with their holding,” he explained.

Also read: Govt: Sale of Subsidiary Shares Not Privatization

One Price Fuel (BBM)

Ugan then explained the state-mandated One Price Fuel (BBM) on PT Pertamina, whose implementation he believed was difficult. However, as a SOE, PT Pertamina must realize it despite having to shoulder high fuel distribution costs, especially in the frontier, outermost, and least developed regions often referred to as 3T (terdepan, terluar, tertinggal) regions. It has to charter planes that cost Rp25,000-35,000 per liter of cargo. Despite its losses, the company has been carrying this mandate to cater to the public.

Also read: Pertamina: Privatization Not Unconstitutional

The mandate, Ugan added, would be hard to implement with profit-oriented private stockholders that aren’t attracted to fuel distribution to those regions. However, PT Pertamina must ensure that people in all of the country’s regions are able to enjoy the same benefits, despite high distribution costs, including when ships used to distribute fuel to the 3T regions carry fuel that below its actual capacity.

“Therefore, if we make an analogy with profits for profit-oriented stockholders, the 3T regions might not get fuel at the same price as other regions in Indonesia,” he said.

Also read: Expert: Formation of Pertamina Sub-holdings Allows Unbundling

Stakeholders’ Interests

Ugan also discussed Pertamina’s profits as sub-holdings. To illustrate this, he explained that when PGN entered the upstream business of oil and gas without any competency and established Saka Energi, Saka Energi suffered losses and burdened PGN. In 2014 when the Minister of BUMN ordered Pertamina’s board of directors to relinquish all Pertamina’s stocks of Pertagas to PGN, leading to acquisition, Pertagas’ profits from its business so far was controlled by Pertamina and most had to be distributed to the public for the interests of stakeholders.

“Pertamina continued to decline, not to mention in 2020 PGN was subject to high tax debts and penalties by the Director General of Taxes, which further reduced its profits. All the while, PGN has an obligation to carry out the Government’s mandate to build a gas network,” he said.

Also read: Kurtubi: Mineral and Coal Management by SOEs a Natural Monopoly

The Petitioner believes Article 77 letters c and d of the BUMN Law prohibits the privatization of limited liability companies in certain business lines. They argued that based on the amendment to PT Pertamina’s (Persero) articles of association No. 27 of December 19, 2016, it does energy businesses. Therefore, it cannot be privatized based on the provision of Article 77 of the BUMN Law. Its businesses are integrated from upstream to downstream, covering upstream/exploration, processing/refinery, marketing and trading, as well as distribution/transportation and shipping.

The Petitioner stated that to improve competitiveness, increase value, expand business networks, and manage independence of State-Owned Enterprises (BUMN), the government may form a holding company for SOEs/company group/holding companies. One of the ways is to establish sub-holdings and subsidiaries of PT Pertamina as shown in the Decree of Pertamina Board of Directors No. Kpts-18/C00000.2020-SO on the Basic Organizational Structure of PT Pertamina: Sub-holding Upstream, Refining & Petrochemical, Commercial & Trading, Gas, Power & NRE, and Shipping Co. The privatization of PT Pertamina subsidiaries by the government has been planned to be done through IPO at sub-holding level. 

Writer: Sri Pujianti
Editor: Lulu Anjarsari P.
PR: Lambang S.
Translator: Yuniar Widiastuti (NL)

Translation uploaded on 4/23/2021 12:02 WIB

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian version, the Indonesian version will prevail.

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