Legislator rejects power price hike

The Jakarta Post, Jakarta

A House of Representatives commission rejected on Thursday the government's proposal to raise electricity charges for households by 14.5 percent every three months next year, saying such hikes would be inordinately burdensome for the public.

Commission VIII for energy and mineral resources, the environment, and science and technology, during a hearing with the state electricity company and Minister of Energy and Mineral Resources Purnomo Yusgiantoro only approved the government's budget proposal for the allocation of Rp 4.1 trillion in electricity subsidies next year.

"These increases (in electricity charges) are too much. Most of the public can't afford them, particularly given the fact that the government also plans to significantly raise fuel prices next year," commission deputy head Emir Moeis was quoted by Antara as saying during the hearing.

This year, the government has allocated Rp 4.1 trillion to fund power subsidies -- similar to the planned subsidy for next year.

During the hearing, Purnomo proposed that power charges be raised by an average of six percent during each quarter of next year.

The charge hike for low income households and charitable institutions was proposed at 14.5 percent given the fact that the charges being applied to these types of customers were much lower than PLN's production costs.

PLN has been in financial difficulties for years due to the economic crisis, which was marked by a sharp depreciation in the value of the rupiah against the dollar.

The state company, which sells its power in rupiah and pays most of its costs in dollars, has for years been forced to sell its power for less than its production costs. As such, it needs to be subsidized by the government.

Today, its power price averages 4.5 US cents per kilowatt hour (kWh), compared to its production cost of 5 cents per kWh.

During the hearing, the commission and the government agreed to set up a small committee to further discuss the details of the charge hikes.

Also during the hearing, the commission agreed to raise the price of kerosene for household consumers to Rp 700 per liter "at the maximum" next year from Rp 600 at present. The government had proposed a new price of between Rp 700 and Rp 750 per liter.

On Wednesday, Purnomo told the commission that the government planned to remove all subsidies from all fuel products, except for kerosene, next year.

The subsidy for kerosene would be removed in 2004.

Purnomo said the plan would cut subsidy spending next year to Rp 15.87 trillion (about $1.74 billion), 52 percent less than this year's spending of Rp 30.5 trillion.

The plan would raise the maximum price of gasoline sold in gas stations from the current 75 percent to 100 percent of the international market price.

Legislator Priyo Budi Santoso, who is a member of Commission VIII as well as the House budget committee, said that the House might approve the plan as the House, the government and the International Monetary Fund (IMF) had agreed to totally remove fuel subsidies by 2004.

However, he said, the budget committee was still discussing the details of the new pricing scheme with the government.

"We are currently involved in a serious debate about the new prices.

"We don't want the gasoline sold in fuel stations here to cost as much as in Singapore gas stations as the price in Singapore is too expensive," Priyo told The Jakarta Post.