Govt mulls 10 percent power rate hike
Wednesday, March 15 2006 - 01:15 AM WIB
Communication and Information Minister Sofyan A. Djalil said Tuesday the government was examining two options in raising the rates for households, businesses and industries.
?We are simulating a hike at 10 percent, or no raise at all,? he said after a meeting on the issue. ?The figure will be the average hike, with the rate for some sectors not being raised at all, like low income house holds, for example.?
Sofyan said the government also considered the fiscal impact from the rate hike taking effect in April, May or June, noting any additional assistance to state power firm PLN would increase the longer it was put off.
?If we can go ahead with the rate hike in April, then it will result, in the lowest amount of additional subsidies needed. Every month of its delay will cost us several hundred billion rupiah?
The government will also try to maintain existing rates for low-income households with installed electricity capacity of 450 kilo-Watt-hour (kWh) and for labor-intensive industries, or at least make the impact less severe.
The hike also is expected to contribute to more efficient use of electricity among the public.
?If we can conserve the use of a 14 watt-lamp each month, we can help PLN save up to Rp 5 trillion (US$541 million),? he said.
The government?s finalizing of its plan came after the Supreme Audit Agency submitted last week the results of its monthlong audit into the production costs of PLN to lawmakers.
It showed the actual cost for electricity production this year would be Rp 833 per kiloWatt-hour (kWh), or 4.3 percent lower than the firm?s projection.
PLN would still need an additional Rp 27.2 trillion for its operations if there was no rate increase. The government has provided a Rp 17 trillion subvention this year.
Finance Minister Sri Mulyani Indrawati said separately a rate hike of 10 percent hike would still be insufficient to cover PLN?s needs.
?It will still depend on the rate policy, but 10 percent will not be enough,? she said.
Sri Mulyani added that any increase in the subvention would need approval from the House of Representatives, and ,that a decision should be made as soon as possible for the health of the budget and the economy in general.
The government increased fuel prices twice last year to cut spending on fuel subsidies, resulting in on-year inflation skyrocketing to 17.11 percent. (*)