Govt plans to raise fuel and power prices
Govt plans to raise fuel and power prices
JAKARTA (JP): The government plans to hike fuel prices by at
least 20 percent and electricity tariffs by 35 percent after
April 1.
Minister of Mines and Energy Susilo Bambang Yudhoyono promised
on Monday the government would move cautiously in order not to
hurt the poor.
"The increases will take place in April 2000 at the earliest.
The weak and small-income consumers will be exempted from the
increases," Susilo told Antara on the sidelines of a meeting with
the heads of provincial mines and energy offices.
The government will cut fuel subsidies for private car owners
but provide fuel for public buses at relatively low prices, he
said.
While power prices for businesses and industry would be
increased, the government would maintain subsidies for households
using less than 450 kilowatts per hour, he said.
Susilo did not say whether the proposed increases were agreed
upon to by the International Monetary Fund (IMF).
On Friday, he said the government and the IMF were still at
odds over the timing and the amount of increases of the two
commodities. He disclosed then that the IMF proposed introduction
of the increases in January. The IMF also suggested a 40 percent
increase for electricity rates.
The government last increased fuel and power prices in May
1998, sparking nationwide unrest which contributed to Soeharto's
loss of power despite his attempt to scale back the price
increases.
Susilo said on Monday the government understood the IMF wanted
to ease the state budget's burden from subsidization.
The fuel subsidy for the current fiscal year ending March 31
is estimated to surge to Rp 25 trillion (US$3.6 billion) from the
initial projection of Rp 10 trillion.
Separately, state electricity company PT PLN said on Monday
that it would require a subsidy of Rp 17 trillion ($2.4 billion)
from the government next year if prices were not increased and
operational inefficiency continued to hamper the company's
financial performance.
Citing a preliminary study by independent auditor Arthur
Anderson, PLN president Adhi Satriya said the company could save
Rp 6.1 trillion by reducing inefficiency.
Some Rp 5.1 trillion would be obtained if PLN succeeded in
renegotiating the prices it pays to 10 independent power
producers (IPP), he said.
"Under the present contracts, we have a financial obligation
of Rp 9 trillion to our IPPs," Adhi told reporters following a
hearing with the House's Commission VIII on mines and energy.
Under a take-or-pay clause, PLN must cover the IPPs'
investment and operational fixed costs, even if it does not
purchase the electricity due to a lack of electricity demand.
"The more we increase sales, the bigger our financial
obligation to them will be," he said.
PLN has proposed a price range of between 3.5 U.S. cents to
4.5 cents per kilowatt hours (kWh), against the average of 6.4
cents demanded by the IPPs, he said.
Another Rp 800 billion could be saved by renegotiating the
prices of natural gas and geothermal which PLN buys from state
oil and gas company Pertamina, he said.
A further Rp 200 billion in savings would come from PLN's own
operations, such as through more efficient maintenance and
reducing electricity theft.
Commission VIII said after the hearing that it would not
endorse any hikes in electricity rates unless PLN presented a
comprehensive view on how and whom the planned hike would affect.
Commission chairman Iwan Prayitno said a team would be set up
to study any rate increase proposals to ensure that they
reflected a fair decision for the weaker consumers.
Ramson Siagian of the Indonesian Democratic Party of Struggle
(PDI Perjuangan) faction said the government should not burden
the public for PLN's inefficiencies.
Hatta Rajasa of the Reform faction said household consumers
using less than 2,200 kWh of electricity should be exempted from
price hikes. The subsidies should not benefit the wealthy, he
added. (03/jsk)