Govt weighs dropping power hike

The government, fearing serious political fallout amid concerted opposition from the public and business community, is likely to drop a planned power rate hike this year, a credible source said.

The State Palace official, who spoke on the condition of anonymity Thursday, said President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla made the decision after a discussion Wednesday.

?There will be dreadful political risks should the government raise the power rates as planned this year. The greatest concern would be the emergence of (political) free riders wanting to take advantage of the situation,? the source told The Jakarta Post.

The source said it would be more politically feasible for the government to shoulder a higher state budget deficit rather than jeopardize the relatively situation.

With increases on fuel prices and power rates inevitably triggering public protests, there is the risk of them escalating into violence and disrupting economic activities.

Communication and Information Minister Sofyan A. Djalil said Thursday the planned power rate hike was likely to be shelved due to the concern of political unrest.

?The government will put the ball in the House of Representatives? court,? he told the Post, adding that the team of economics ministers was still exploring ways to make up the shortfall of state power firm PT PLN if rates were not raised.

Should the House and government agree on providing an extra subsidy to PLN, then there would be no need to proceed with the increase, he said.

The government is exploring several power rate schemes after an audit by the Supreme Audit Agency showed that PLN would need an additional subvention of about Rp 10.2 trillion (US$1.10 billion), on top of the Rp 17.7 trillion allocated in the current 2006 state budget, to avoid raising power rates to cover the increase in fuel costs.

?The problem now is that the government and the House are still working to find additional funds from the state budget to plug this (Rp 10.2 trillion) deficit,? said Energy and Mineral Resources Minister Purnomo Yusgiantoro.

Coordinating Minister for the Economy Boediono said the government had yet to decide on whether to drop the rate hike plan because it was still making calculations and considering its possibilities.

?We have not yet proposed or decided anything. What we presented to the House was only the results of our simulation of a rate hike. All of these are still being exercised,? he said.

Finance Minister Sri Mulyani Indrawati, who said Wednesday a 10 percent rate hike would still be insufficient, said the government would try to cover the shortfall through the state budget before resorting to other means.

The chairman of the National Economic Recovery Committee, Sofjan Wanandi, argued that a rate increase would result in serious economic and political consequences, with households and businesses already burdened following last year?s double fuel hikes and the economic slowdown.

?Even now, many industries are simply struggling to survive. Employees are short of work and at risk of being laid off, while protests continue to snowball,? he said.(*)