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Govt to cut electricity rates amid declining crude oil prices
In addition to likely cuts in subsidized fuel prices, notably Premium gasoline and diesel, the government may decide Monday to cut electricity tariffs
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In addition to likely cuts in subsidized fuel prices, notably Premium gasoline and diesel, the government may decide Monday to cut electricity tariffs.
The government has said it will convene a Cabinet meeting Monday to decide on prices of Premium gasoline and diesel, but now electric power rate cuts could also be under consideration, a minister said Sunday.
"Now we are still calculating (the electricity rates reduction) carefully, including its impact," said Energy and Mineral Resources Minister Purnomo Yusgiantoro.
Having twice slashed fuel prices last December, another cut in prices of Premium gasoline and diesel -- plus electricity -- would definitely boost the popularity of President Susilo Bambang Yudhoyono ahead of the much-awaited upcoming general elections.
The government's intention to cut the power tariff had been hinted by acting Coordinating Minister for the Economy Sri Mulyani last week.
She said the government would study further the impacts of the declining crude oil prices to the production cost of state power firm PT PLN, the country's sole distributor of electricity.
"We will see whether there are some aspects that can be more efficient," Mulyani said.
The latest revision of the electricity rates was in 2003, when the government raised the rates by an average of 6 percent.
Currently, the average electricity rate is Rp 650 (5.93 US cents) per kilowatt-hour (KWh), PLN's finance director Setio Anggoro Dewo said on Jan. 9.
He said the rate is still far lower than PLN's electricity production cost at Rp 1,300 per kWh.
Setio said PLN would have no objection to the rate reduction, with the government saying it would give greater subsidies to PLN in return.
"It would be just like a zero sum game," Setio said.
According to Setio, the declining crude prices and workers layoffs in some factories had decreased PLN's production cost from Rp 1,300 per kWh to Rp 1,100 by the end of last year.
He said that, with the additional power from three new power plants in Java, average cost was expected to decrease further to Rp 900 per kWh.
In less than two months, the government has cut the subsidized fuel prices twice. On Dec. 15, the government cut the price of Premium by Rp 500, to Rp 5,000 (45 US cents) per liter, and the price of diesel by Rp 700, to Rp 4,800 per liter.
In early December, the government cut the price of Premium gasoline by Rp 500 per liter.
The Indonesian Chambers of Commerce and Industry (Kadin) suggested that fuel prices would be cut by another Rp 500 on Monday.
Kadin chairman M.S. Hidayat said last week after a meeting with the President that a further cut in fuel prices would reduce production costs of many industries. Lower production costs would mean industrial products would eventually be cheaper.
Yudhoyono has criticized businesses as the prices of their products have not yet reflected the reduction in fuel prices at home - following December's double price cuts - and in global crude oil prices.
