The government has hinted it will not yet raise the electricity tariff early next year, although required under the 2010 state budget, factoring in future economic conditions like increasing inflation.
The electricity tariff hike will affect business players, who will need to recalculate their costs, and consumer prices, which if sharply inflated will hurt people’s purchasing power (which drives 60 percent of the economy), said Anggito Abimanyu, Finance Ministry’s head of fiscal policy.
“Therefore we are reconsidering whether to raise [the electricity base tariff] in January,” he said Monday at the ministry.
Under the 2010 budget, the allocation for the electricity subsidy stands at Rp 37.8 trillion (about US$4 billion).
The government is required to impose market price for users of more than 6,600 watts to encourage energy efficiency, following an approval to do this from the House of Representatives.
The Energy and Mineral Resources Ministry said earlier that the proposed allocation of Rp 37.8 trillion for the electricity subsidy is not enough, suggesting a tariff raise is inevitable, in accordance with a proposal by state utility firm PT PLN made in September.
Coordinating Minister for the Economy Hatta Radjasa said the government’s main focus at the moment would be on improving the financial health of PLN to enable it to provide electricity nationwide.
PLN needs Rp 32.7 trillion next year to address the blackouts which are now happening in the country.
The government will lend Rp 10 trillion through a subsidized loan agreement to PLN, while the remaining funds needed will raised by issuing bonds, said Fahmi Mochtar, former president director of PLN.
The government is also looking to raise PLN’s margin to 8 percent from 5 percent to make its internal financial balance healthier to give it greater borrowing capacity.
“We expect in 2010 [the financial problem] would be finished,” said Hatta, adding that the government expects PLN can solve the blackout problems within 10 months in 2010.
The government said it might spend an additional Rp 1 trillion per month on the electricity subsidy without an increase in electricity prices.
Hatta said the government could manage to allocate that amount.
Anggito said the government would calculate spending posts allocated in the 2010 budget to be submitted to the House under the revision to the 2010 state budget.
“Now we’re looking at which [posts] will be adjusted ... We’ll see the amount. [The planned budget revision will be submitted] in March,” he said.
The hike in electricity base tariffs would tend to encourage inflation.
The central bank has warned against increasing administered prices next year as inflation will likely rebound to its “normal range” of between 4 percent and 6 percent.
This year’s inflation is estimated to be slightly below 3 percent as demand fell due to the global economic downturn, the central bank said.
