Hike in tariff will help rural people: Minister

Hike in tariff will help rural people: Minister

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana
yesterday defended the government's decision to hike electricity
tariffs beginning next month, saying that it will help accelerate
electrification for the majority of the country's population.

"Many people may have forgotten that around 60 percent of our
population, who live in rural areas, have not been reached by
electricity," Sudjana said during a three-day workshop on energy
at the Agency for the Technology Assessment and Application
(BPPT).

He contended that the planned increase in electricity billing
rates will enable the state electricity company PT PLN to collect
funds to finance its electrification program.

"I am deeply concerned over recent comments raised by economic
analysts who criticized the government on its new policy of the
tariff hikes, which they labeled as unfavorable to small-scale
subscribers," he said.

The government last week announced an average increase of 7.8
percent in electricity billing rates effective next month.

The government has also allowed PLN to make tariff adjustments
every three months on the basis of the impacts of inflation,
depreciation of the rupiah, increases in fuel prices and
electricity charges determined by privately-run power generators.

Under the new policy, small households with a capacity of
between 60 volt amperes (VA) and 200 VA will pay Rp 71.70 per
kilowatt hour (kWh), reflecting an increase of 7.52 percent from
Rp 66.50 per kWh currently.

Sudjana argued yesterday that under the new tariff
arrangement, small-scale subscribers will pay a lower rate for
electricity.

He added that large-scale subscribers will be burdened with
the cross-subsidy program for helping small subscribers tackle
the remaining part of the unabsorbed tariffs.

"It is not true that the government has given special
treatment to large-scale subscribers, which are usually from the
industry sector," he said.

Demand

He contended that the increase in the electricity billing
rates was also urgent, considering that the demand for the
electricity in the country is sharply growing. "The growth rate
of our electricity demand is the highest in the world," he said.

He said the country's demand increases by over 15 percent per
year.

Indonesia, therefore, plans to establish new generation plants
with a total capacity of 13,000 megawatts (MW), of which plants
with a combined capacity of 9,500 MW will be constructed by PLN
alone and the remaining 3,500 MW by the private sector, he said.

PLN needs around Rp 12 trillion per annum for its own power
projects, he added.

Sudjana called it groundless to say that the planned
electricity hikes will hinder our industry's competitiveness on
the international market.

"If there is a problem in the industry, I would say that the
problem is caused by its own inefficiency, not by the electricity
tariff hikes," he said.

Sudjana acknowledged that PLN should improve its efficiency.
"But, I have seen that PLN made its best efforts to reduce its
losses from 20 percent in 1985 to 12 percent in 1993," he added.

PLN's president, Zuhal, said that the proceedings of the
tariff increase will not be used to strengthen PLN's financial
structure but to finance electrification projects throughout the
country.(fhp)