Gas Subsidies Not a Silver Bullet for Reducing Layoff Risks in Industry
The government’s plan to provide gas price incentives for industries is considered capable of helping to suppress the potential for layoffs (PHK), particularly in energy-intensive sectors such as the ceramics industry. Nevertheless, the policy is deemed insufficient to resolve the issue of layoffs triggered by various structural factors.
The Executive Director of CORE Indonesia, Mohammad Faisal, stated that the rise in energy costs, specifically Liquefied Natural Gas (LNG), has increased production costs for numerous industries heavily reliant on gas supplies.
“The factors causing these layoffs are actually far more complex. One of them is indeed the increase in production costs caused by rising energy prices. Many industries depend on gas, such as the ceramics industry, which is an energy-intensive sector,” Faisal said when contacted on Monday (29/6).
According to him, the surge in energy prices in the international market has significantly increased industrial production costs. This condition has prompted companies to implement various efficiency measures, including reducing their workforce.
Therefore, the government’s policy to lower gas prices for industries from approximately US$23 per MMBtu to US$13 per MMBtu is seen as providing much-needed breathing room for businesses to curb production costs.
“With the government’s incentive in the form of subsidies to lower domestic gas prices, it will certainly assist industries and reduce the tendency to conduct layoffs. Typically, when production costs rise, companies implement efficiency measures, and the most frequent method is reducing the number of employees,” he explained.
However, Faisal emphasised that gas subsidies only address one of the causes of layoffs. He noted that the labour issues occurring in recent years are influenced by various other, more complex factors.
He explained that the surge in gas prices due to the escalation of conflict in the Middle East only occurred this year, whereas the wave of layoffs has been ongoing for several years prior.
“Can it address the overall potential for layoffs? Certainly not, because the causes of layoffs are much more complex. This problem existed even before the rise in gas prices due to the Middle East conflict,” he remarked.
Faisal assessed that the government also needs to address other issues affecting industrial competitiveness, ranging from competition in both domestic and export markets, unsynchronised industrial policies, to obstacles in importing raw materials and various trade barriers in export destination countries.
“If the goal is to suppress the potential for layoffs, in addition to providing energy cost incentives, the government must also look at other factors beyond the rise in gas prices that have historically caused companies to seek efficiency,” he concluded.