Thu, 29 Apr 2010

From: Antara News

By Yessar Rosendar
The government’s reduction of its proposed electricity price hike from 15 percent to 10 percent was not enough to satisfy business leaders, who on Wednesday said that lower-income consumers should not be shielded from the tariff hike.

Lower-income consumers should also be forced to carry a share of the responsibility for financing the revitalization of the country’s sagging power network, they said.

“We think that it will still burden industry. It will increase operating costs and weaken our competitiveness against other countries,” said Adi Putra Tahir, acting chairman of the Indonesian Chamber of Commerce and Industry (Kadin).

Business leaders preferred a 5 percent increase for all consumers, regardless of the level of consumption or ability to pay, he said. “Everyone should take the burden together and contribute to reduce the electricity subsidy,” he said.

Ernovian Ismy, secretary general of the Indonesian Textile Association (API), said he was strongly opposed to the proposed hike. “Whatever the rise will be, we will oppose it, because it will not solve the problem for PLN [PT Perusahaan Listrik Negara],” he said.

Instead of increasing prices, PLN should be more efficient in its fuel mix and not use too much diesel to power their plants, Ernovian said. However, PLN has been unable to get enough gas and coal, which are much cheaper fuels than diesel.

“It’s the government’s fault to have an unclear energy policy, resulting in PLN not getting their energy needs,” Ernovian said.

The tariff hike will hit the textiles industry hard as it operates 24 hours a day, he said. Manufacturers may be forced to scale back production because of the increased cost, affecting sales and maybe also leading to in layoffs, Ernovian said. “The effect will be significant as electricity accounts for 18 percent to 28 percent of our production costs.”

The government had proposed a 15 percent rate increase for most commercial and residential consumers, effective in July. However, the House of Representatives Commission VII, which oversees energy issues, opposed the 15 percent hike and offered a Rp 2 trillion increase in the subsidy in exchange for a lower rate hike.

“We don’t want to burden the poor people,” said Golkar’s Dito Ganinduto.

Coordinating Minister for the Economy Hatta Rajasa said the government would propose a 10 percent rate hike as a result of the extra subsidy.

A University of Indonesia study supports the claims of business leaders that a rate hike would hurt their competitiveness. The cement and textile sectors would be hurt most by electricity rate hikes, the study said.

Energy Minister Darwin Zahedy Saleh said it was still possible that the 10 percent tariff hike plan will be changed. The government wants to ensure that the subsidy is distributed to the those that need it, he said. “We will not close our eyes and we will keep studying which categories will get the subsidy,” Darwin said.