House commission recommends higher power subsidy spending

The Jakarta Post , Jakarta | Tue, 03/25/2008 12:43 PM | Business

A House of Representatives' commission has recommended the House Budget Committee set this year's electricity subsidy allocation at Rp 61.01 trillion (around US$6.7 trillion).

The figure, using a revised oil price assumption of $95 a barrel, is more than double the previous amount of Rp 29.8 trillion, which was based on an oil price assumption of $60 per barrel.

The recommendation was made Monday by House Commission VII, which oversees energy and mineral resources, to the Budget Committee, which is tasked with revising the 2008 state budget.

"The new subsidy allocation was set based on several revised assumptions including crude oil prices and an exchange rate of Rp 9,100 per U.S. dollar," said Energy and Mineral Resources Minister Purnomo Yusgiantoro.

Purnomo said the revised figure is actually Rp 5 trillion short of fully meeting the country's power consumption.

"State electricity firm PT Perusahaan Listrik Negara (PLN) will need to speed up its subsidy-reduction program to bridge the Rp 5 trillion gap," Purnomo said.

Around 30 percent of PLN's power plants currently run on oil-based products such as diesel fuel.

PLN is gradually reducing its dependency on oil to generate electricity and replacing it with gas and coal, which are both cheaper fuel commodities.

Other programs include the planned distribution of energy-saving lamps to households and the implementation of new power rates to provide incentives for households to consume less electricity.

The recommendation will be discussed further at the House Budget Committee under the 2008 state budget revision.

The revision, which involves both the government and lawmakers, was deemed necessary to better reflect the world's economic situation, marked by the continued rise in global oil prices, now hovering above $110 per barrel.

Many critics, however, have said the "tinkering" with the budget is mainly because the government is unwilling to raise domestic fuel and electricity prices ahead of next year's general elections.

On Monday, the committee also set the subsidy spending for fuel at Rp 130 trillion, assuming total fuel consumption is 37 million kiloliters and the price of oil per barrel is $95, said committee vice chairman Harry Azhar Aziz.

Previously, the fuel subsidy allocation was set at Rp 103 trillion. (uwi)

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