The government expects to remove the electricity subsidy completely by as early as 2014 so that it will have more funds available to fight poverty and improve healthcare directly for the poor, a minister has said..
“We hope we can fully implement the economic tariffs for electricity by between 2014 and 2015,” Energy and Mineral Resources Minister Darwin Zahedy Saleh said in Jakarta on Monday.
Darwin said that this had been part of the government’s plan. “But ,we will keep protecting the low income people,” Darwin said.
Currently, all types of customers pay for electricity at far lower than its market price. The current average electricity tariff is at about Rp 655 (7.19 US cents) per kilowatt hour (kWh), while the market price is about Rp 1,030 per kWh, Murtaqi Syamsuddin, a director at state power utility PT PLN, said.
The low electricity tariff is believed to be one of obstacles hampering investment in the power sector. This in turn has resulted in an acute shortage of power in many parts of the country.
Energy analyst Tri Mumpuni threw her support behind the government’s plan to completely scrap the electricity subsidy by 2014. “The money will be better used to improve healthcare for the poor instead of giving a subsidy to the rich,” Mumpuni said.
However, she added that the subsidy for low income customers must be maintained. The government has been mulling increasing electricity tariffs by an average of 15 percent starting from July. “We are still revising the plan so that this will be affordable for the public. The House of Representatives will be consulted about the plan first,” Darwin said. He added that the government would try to maintain subsidies for low income households and small industries.
The electricity subsidy is one of major spending items in the state budget. In the revised 2010
state budget, the government proposes to increase the electricity subsidy to Rp 54.5 trillion (about US$5.99 billion), an increase of 44.2 percent on the initial allocation for 2010. The government said it needed to increase the subsidy due to a delay in the increase in the electricity tariffs.
Chairman of the House budget committee Harry Azhar Azis said the House actually expected the government to be more progressive in scrapping the electricity subsidy.
“We don’t know yet the government scenario, but we expect that the subsidy will be waived by between 2011 and 2012,” Harry said. He added that the House was preparing a scenario for the proposed tariff increase. “Tariffs for customers with capacity of 450 kWH will not be increased,” he said.