Speaking to reporters in Jakarta on Monday, the Indonesian Textile Association (API) chairman Ade Sudrajat said the impact of the average 40 percent increase in power tariffs for industries would be unbearable for most of the association’s members.  

He said the 15 percent increase to production costs as the result of the electricity tariff increase would be too much for Indonesian textile producers, which have long struggled to cut costs in order to be able to compete with cheaper products from China.

“The recent electricity price hike may cause a halt in the investment growth of the real sector which could lead to massive layoffs,” he told The Jakarta Post on Monday, after a meeting on the electricity price hike at the Industry Ministry.    

Separately, vice chairman of the Standing Committee for Regional Cooperation at the Indonesian Chamber of Commerce and Industry (Kadin) Franky Sibarani said the recent tariff hike was contrary to the government’s efforts in attracting investors.

“It won’t only impede our efforts to attract new investment, but also prevent the expansion of the existing factories,” he told journalists.

Moreover, he continued, many industrial manufacturers struggling to meet the new rates were considering halting production to become distributors of imported products.

The Indonesian Various Ceramic Industries Association’s (Asaki) Achmad Wijaya said state electricity company PT PLN was just pursuing its own revenue targets.

“It is just concerned with its own revenue targets. As a result, the price formulation that had been discussed wasn’t implemented,” he said.

Meanwhile Industry Minister M.S. Hidayat said his office was assessing the business players’ call to review the rise in electricity rates.

The rise of between 30 percent and 80 percent is far higher than the previously planned hike of 10 percent announced by PLN, the minister said, quoting 25 business associations that complained of the
new rates.

“These [rates] will harm industries, particularly producers of steel, glass and textiles. I will look into the issue,” he said at Merdeka Palace, adding he would bring his findings to a meeting of economic ministers headed by Coordinating Economic Minister Hatta Rajasa.

Hidayat said industries overly burdened by the new tariffs might be forced to lay off workers, adding that labor-intensive industries have been hardest hit by the hike.

The minister, who was previously chairman of the Indonesian Chamber of Industry and Commerce, added that industries were already burdened by the free trade agreement between ASEAN countries and China, which produces low cost value added goods at extremely competitive prices.

Hidayat expected PLN to revise the new rates for certain industries. (ebf)

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