New electricity rates irrational: Steelmakers

JAKARTA (JP): The federation of steel-related producers said on Thursday most of its 97 active members could be forced to close down their plants if state-owned electricity company PLN maintained its new higher electricity rates.

Speaking at a media conference, federation secretary-general Murbiantoro Sumantoro said the 88 percent to 100 percent increase in electricity rates imposed on its members was irrational.

"If the rates are not lowered, most local steel-related industries will collapse," he said.

PLN raised electricity rates by an average of 29 percent beginning this month. Small household users are exempt from the increase, but the rates for large industrial users were increased by between 53 percent and 76 percent.

However, Murbiantoro said the increase in electricity rates for its members ranged from between 88 percent and 100 percent.

The federation's members include the associations of billet and concrete bar producers, steelpipe producers and wire bar producers. These associations group about 40,000 workers.

"It is not fair to charge the highest rates to the largest (electricity) users, such as the federation's members," Murbiantoro said.

The federation also complained about not being consulted by PLN prior to the rate increase.

He said the federation had asked PLN to lower the rates or to offer incentives to enable its members to cut their operational costs. "However, PLN has not responded and has ignored our input," he added.

According to the federation, the ideal rates for its members are between 25 percent and 30 percent, similar to the electricity rates in other Southeast Asian countries.

Murbiantoro said the federation's members involved in the production of billets, the raw material for steel products, were the hardest hit by the rate increase.

Most of the billet producers, PLN's largest customers, may stop production because the high electricity rates mean they will no longer be able to compete with imported products, he said.

The president of the association of billet and concrete bar producers, Zainal Musa, said his members were the country's largest electricity consumers, with electricity bills totaling Rp 600 billion (US$81 million) last year. (07)