Businesses ready to raise prices as electricity costs rocket
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As the government decides to raise electricity prices from January, businesses will plan to increase prices next year in a bid to preserve their profits amid challenges such as higher wages.
Indonesian Chambers of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto said on Friday that with the government’s decision to increase power prices to cut energy subsidies, businesses would undoubtedly take “adjustment measures” to handle soaring costs.
“The power price increase of 15 percent will certainly raise operational costs and force some industry players to push it onto consumers by adjusting the price of their products to cut their budgets,” he told The Jakarta Post in a telephone interview.
Earlier this week, Energy and Mineral Resources Minister Jero Wacik told reporters the government would increase the electricity tariff by 4.3 percent once every three months. With the price increase, the government would be expected to spend Rp 78.6 trillion (US$8.27 billion) on electricity subsidies for 2013 or Rp 14 trillion less than the Rp 92.52 trillion without any price raise.
Under the plan, the increase will not apply to small households and businesses rated to use between 450 and 900 volt-amperes (VA). The increases will apply to four categories of power users, including medium households rated to use 6,600 VA, businesses rated to use between 6,600 VA and 200 kilovolt-amperes (kVA), businesses rated to use up to 200 kVA such as malls and government offices and street lighting rated to use 6,600 VA to 200 kVA.
Commenting on this, Kadin chairman said that industries relying on electricity to drive their production such as textiles would be burdened by the scheme although the government had opted to increase power prices gradually.
“Take the textile industry for example, which will experience an increase of 15 to 18 percent of its production costs. It will most likely increase the price of their products,” he said.
Indonesian Employers’ Association (Apindo) deputy chairman Anton Supit said both the government and the House of Representatives had decided to weigh down industry in a bid to carry on “populist stances” ahead of the 2014 general election.
The government, he said, had always pushed industry to keep up with global challenges as well as providing jobs while at the same time burdening it with politically motivated policies.
Anton said the association agreed with the increase as long as it applied to all customers, and that the government should cut the subsidy for the 39 million customers in small households using 450 VA.
“We want to share the burden. The tariff for household customers should also be raised but of course the increase should be proportional in a bid to educate them to efficiently use the power consumption,”
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