Thu, 06 Jan 2000

Govt may lower planned hike in fuel prices

JAKARTA (JP): The government said on Wednesday that increases in electricity rates and power prices would likely be lower than the initially proposed 35 percent and 20 percent respectively.

Minister of Mines and Energy Susilo Bambang Yudhoyono said the government was negotiating with the special team formed by the House of Representatives on the rate of increases for both commodities.

"I am confident the increase in electricity prices can be lowered, and I hope the fuel hike can also drop below 20 percent," Bambang said on the sidelines of a meeting with the House's power and fuel tariff team.

The government indicated in November 1999 that it would cut subsidies on fuel and electricity by raising their respective prices by 20 percent and 35 percent as of April this year.

Bambang said the special team set several conditions for the increases and "we have reached agreement on several points".

He said the government and the team agreed that small-income consumers must be protected from the subsidy cuts.

Bambang earlier stated the government was committed to exempting low-income consumers from the hikes, indicating that small households and public transportation would continue receiving subsidies.

He said the team also demanded the government be selective in providing subsidies to the public to keep the affluent from benefiting.

However, several issues, including government-led negotiations with independent power producers (IPP), were still under discussion with the team, he said.

The team would reject any proposed hike in electricity rates if it was necessary due to inefficiency in the performance of state electricity company PT PLN and the state company's failure to obtain power supplies from IPPs at fair prices.

PLN estimated the cost for the purchase of IPPs' electricity would reach some Rp 9 trillion (US$1.2 billion) this year.

Some minor technical issues have also been discussed, such as whether profit-oriented hospitals should be classified as social institutions entitled to receive government subsidies, Bambang said.

Head of the team Pramono Anung said the team aimed to keep electricity and fuel hikes as low as possible.

"I can't say any figures, but we're expecting half of what the government proposed."

He added the team was preparing arguments to justify the increases.

Last year, several House members suggested electricity rates and fuel prices be increased by only 20 percent and 10 percent respectively.

However, Pramono said it was not a final proposal of the team. (03)