Fri, 12 Mar 2010
From: The Jakarta Globe
By Irvan Tisnabudi & Dion Bisara
Business groups on Thursday came out against the government’s plan to raise electricity rates by an average of 15 percent, arguing that the increase would hurt manufacturers as they try to cope with the recently implemented Asean-China Free Trade Agreement.

“Electricity is the backbone of all industry, so we can’t afford to have a higher electricity rate,” said Ernovian Ismy, secretary-general of the Indonesian Textile Association (API).

Echoing the views of some lawmakers, Ernovian said state electricity company PT Perusahaan Listrik Negara should look at cutting costs and improving efficiency instead of merely raising rates.

Urip Timuryono, the chairman of the Indonesian Cement Association (ASI), said domestic industries needed to become more competitive, and the rate hike would harm this effort.

“In the midst of dealing with the ACFTA, an increase in electricity tariffs is a heavy burden on our industries,” he said.

Urip said he hoped the plan would be blocked.

“In Indonesia democracy plays a huge role, so I hope the government finds the best solution for all parties,” Urip said.

Announced on March 1, the proposed rate hikes are intended to help PLN cover its burgeoning costs. PLN, which has suffered years of losses due to selling electricity at below cost, is in the midst of a major expansion of its generating capacity to meet the continually rising demand.

A number of prominent business executives will today attend a limited ministerial meeting to discuss the hikes, planned to take effect from July. They would also apply to residential customers.

However, the government is already facing difficulties getting approval for the rate hikes, which require a majority in the House of Representatives. Many lawmakers are opposed to the plan.

Finance Minister Sri Mulyani Indrawati has said that if the government did not proceed with the hikes it may be forced to spend an additional Rp 6.8 trillion ($741.2 million) on electricity subsidies this year, raising the budget deficit from 2.1 percent of GDP to 2.2 percent.

“PLN’s financial condition must be guarded because it has a big mission,” Sri Mulyani said. The electricity supplier needed to earn enough to cover its operating costs, she added.

Helmi Arman, an economist at PT Bank Danamon, said he expected many lawmakers to strongly oppose the tariff hikes.

“The plan to hike rates must still go through the House, which is still in recess,” he said. “So no final decision is expected until May at the earliest.”

Adding to the difficulties facing the rate hikes, some members of the House’s Budget Committee have called for a boycott of budget discussions as part of the fallout from the Bank Century investigation, Helmi said.



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