PLN asks for subsidy of Rp 35.4 trillion in 2006

State owned electricity company PLN will need the government’s subsidy of up to Rp 35.4 trillion in 2006 to help cope with its cash flow problem and finance its investment plans, Investor Daily reported on Friday.

“PLN should be given a subsidy of about Rp 35.4 trillion, if it is not allowed to raise the electricity tariffs and should bear all the cost to maintain its cash flow and to cope with the impact of fuel price increase,” PLN’s president director Eddie Widiono Suwondho said in a hearing with the Commission VII of the House of Representatives.

Eddie estimated that the electricity demand would increase by at least eight percent next year while the price of crude oil would reach US$70 per barrel. It means that the company’s spending for the purchase of diesel oil would be far higher than that of this year.

He said that the government’s subsidy of about Rp 4.5 trillion given to PLN this year was far from enough to cope with the higher fuel spending, to pay the obligation to the government which reached about Rp 8.5 trillion and to finance its investment totaling about Rp 5 trillion.

“PLN has therefore requested the government to increase this year’s subsidy by Rp 10.4 trillion. Without an increase in the subsidy, PLN will suffer a deficit of about Rp 1.7 trillion in its cash flow,” he added.(*)