Govt, House agree to drop electricity price-hike plan

After days of discussion, the government and the House of Representatives Commission VII overseeing energy have decided to delay a plan to increase the basic rate of electricity in April this year, The Jakarta Post reported.

?We have agreed to delay the price increase. We may execute the plan next year, but it will depend on the result of the discussion for the 2013 state budget draft,? Energy and Mineral Resources Minister Jero Wacik told reporters on the sidelines of a meeting with the Commission in Jakarta on Thursday.

Jero said that in consequence of the delay, the government would have to add more subsidies to maintain the reliability of the existing power infrastructure following delayed operations of several new coal-fired power plants.

However, the lawmakers instead reduced the electricity subsidy proposed by the government to Rp 64.97 trillion from the Rp 89.5 trillion stated in the revised 2012 state budget. Despite the cut, the amount is still higher than Rp 44.96 trillion in the original budget.

While Jero and Coordinating Economic Minister Hatta Rajasa suggested the delay in raising the electricity rates, the Finance Ministry?s fiscal policy agency interim head, Bambang Brodjonegoro, said the delay would be a burden on the state budget and would hinder private independent power producers (IPP) from cooperating in expansion projects with state electricity company PT PLN.

?There is going to be a subsidy increase of between Rp 5 trillion and Rp 6 trillion in the state budget, and this is not our only concern,? Bambang said on Thursday.

?In order for electricity to expand, we have to invite IPPs because we cannot rely only on PLN. IPP companies want reasonable tariffs. If the rates are too low, then who will want to invest? In which case, our industry?s development could face another delay in its expansion," he added.

?So, giving positive signals to players is important. A rate hike, which has been scheduled but delayed numerous times, is important," he said.

Bambang said he could understand the objections coming from businesses, represented by the Indonesian Employers? Association (Apindo), on the planned electricity-price hike, but he stressed that the Finance Ministry would do its best to ensure fairness if the increase took place.

All members of the Commission agreed to delay the price increase to ease people?s burden if the plan to increase subsidized fuel prices was implemented in April.

Tri Yulianto of the Democratic Party said that if the rate of electricity was increased together with the subsidized fuels, the economic burden would be too heavy for most people. (*)