Published: July 16 2008 16:08 | Last updated: July 16 2008 16:08
Companies operating in Indonesia have criticised the government over power cuts and Jakartaâ€™s attempts to deal with them, including an edict forcing factories to move production to weekends from next week.
A series of potential blackouts are scheduled for this week and next in Jakarta and the nearby industrial zone of Tangerang. Decades of under-investment in energy infrastructure, coupled with soaring prices for coal, oil and gas have made blackouts a regular occurrence across the country and the government is scrambling to manage electricity demand before the first of 10 new power plants gets up and running in the middle of next year.
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More than 400 Japanese companies jointly issued a formal complaint to the government this month about the frequent cuts to power supply and a lack of warnings from PLN, the state-owned electricity company.
The Indonesia Olefin & Plastic Industry Association is in talks with PLN over future supplies, warning that $1.5bn (Ł750m, €944m) in pending investments by members is in the balance.
â€śPower supply is becoming more and more of a problem and we are prepared to pay a higher rate to ensure the availability and reliability of electricity,â€ť said Budi Susanto Sadiman, the associationâ€™s secretary-general.
The government has tried to reassure companies that they will not have to pay higher wages for those working on the weekend as a result of shifting production but the Indonesian Employers Association says it will be â€śvery difficultâ€ť to make the change. â€śNobody is happy with this change but we have little choice as the lack of electricity is a national issue,â€ť said Indra Kesuma, the groupâ€™s executive director. â€śWe are concerned that this rule might be used to favour some companies over others.â€ť
Companies that do not comply will face temporary power cuts. Sri Mulyani Indrawati, finance minister, said the rule might be extended to banks, ports and customs offices to support the manufacturing industry.
Purnomo Yusgiantoro, energy minister, has proposed that coal mining companies pay their 13.5 per cent royalty to the government in coal not cash, to help secure domestic supply.
The government is trying to reduce the countryâ€™s reliance on oil in a bid to cut its subsidy bill. Its new power plants, which are expected to add 10,000 megawatts to capacity by 2010, will all be fired by coal.
Indonesia tried to make its electricity industry more efficient by introducing a law in 2002 to break PLNâ€™s monopoly but the law was annulled two years later and debate about a replacement has dragged on.