The government and the House of Representatives have dropped a plan to raise electricity prices next year, and have allocated Rp 10 trillion (US$1.12 billion) in standby reserves to avoid the fiscal repercussions of a growing subsidy.
Speaking to reporters after a House plenary session deliberating the 2011 State Budget Law on Tuesday, Finance Minister Agus Martowardojo said state-owned power company PT PLN needed to take major steps.
“PLN must carry out efficiency measures, avoid losses, replace fossil fuels with gas, and accelerate the construction of coal-fired power plants under the 10,000-megawatt fast-track program,” Agus said.
The government and the House agreed to allocate Rp 40.7 trillion for the electricity subsidy next year. The amount is lower than the forecast Rp 53 trillion deficit from electricity provision costs that PLN would have to bear.
The government bases the subsidy figure on several assumptions, including an Indonesian Crude Price (ICP) of $80 per barrel, and an exchange rate of Rp 9,250 to the dollar, and the electricity sales growth at 7.4 percent.
The government expects efficiency measures carried out by the power company to help reduce costs. Previous hearings at the House revealed that the efficiency measures, including securing gas supply for generators instead of diesel fuel, would help the company reduce costs by Rp 8 trillion.
Moreover, a Rp 4.6 trillion deficit from fiscal year 2009, which has been carried over to 2010, would be carried over to 2011, and then 2012, thus making the case for the Rp 40.7 trillion electricity subsidy.
Agus said, however, there was a chance for the government to cover the Rp 4.6 trillion deficit earlier.
“PLN must increase its efficiency efforts. If this cannot be implemented, we still have fiscal risk reserves [of Rp 10 trillion],” Agus said.
Deputy Finance Minister Anny Ratnawati said using the reserves must be discussed with the House’s budgeting committee first.
The House passed the 2011 state budget bill into law on Tuesday, despite an extraordinary incident that saw an alien provision unexpectedly emerge in the bill, which had gone through ardous examinations in previous hearings with the government.
Lawmakers lambasted the existence of article 8 point 2b, which stated that the electricity price for customers that draw 6,600 volt- amperes or more would be automatically set to the market price if the combined consumption of that group exceeded 50 percent of national consumption.
Lawmakers said the article had never been agreed to and that its presence in the draft was a serious crime. House Budget Committee head Melchias Markus Mekeng said the article had been proposed by
the government in the state budget bill, but had been refused by the lawmakers.
Agus told reporters that the mistake was an unintentional error.
