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Energy price cuts in latest package
The government announced energy price cuts and new land and financial policies in its third economic stimulus package on Wednesday, as it reiterated a âcommitment to structural reformâ
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The government announced energy price cuts and new land and financial policies in its third economic stimulus package on Wednesday, as it reiterated a 'commitment to structural reform'.
The package includes cuts in the prices of diesel, non-subsidized RON92 Pertamax and RON90 Pertalite gasoline, 12-kilogram LPG canisters and aviation turbine fuel (avtur), Energy and Resources Minister Sudirman Said said in a televised media briefing.
The government has also introduced incentives for electricity, which include lower rates when the benchmark domestic oil price falls, discounts on late night to early morning use of electricity and a relaxation of payment for outstanding electricity bills.
'There are so many businesses that experience cash flow problems ' possibly because of layoffs ' causing their electricity payments to fall into arrears. There's a large number of these [companies],' Sudirman explained.
Indonesia's economic growth has weakened to a six-year low and the rupiah touched the lowest level since 1998 a couple of weeks ago, putting pressure on businesses that suffer from higher costs but reduced consumer demand.
'We will boost mechanized industry, which will maximize its production capacity at night when the average power load is lower,' Sudirman added, in reference to the new policy that gives a 30 percent discount on electricity used between 11 p.m. and 8 a.m.
The director of the Indonesian Resources Studies (IRESS), Marwan Batubara, agreed that lowering the diesel price would be an incentive for industrial players, which are the biggest consumers of diesel fuel.
However, he said, how large the impact would be remained a big question as the reduction in diesel price was only Rp 200 (less than two US cents) to Rp 6,700 for subsidized diesel. 'The prices of goods and services have already soared and are unlikely to go down,' he said.
The widely used RON88 Premium gasoline price remains the same, as state-owned Pertamina, which distributes the fuel, is already selling it below its market value. The company reported Rp 15 trillion losses in fuel distribution during the January to August period of this year.
President Joko 'Jokowi' Widodo last week asked Pertamina to make cost efficiencies so that it could lower the Premium price, but Cabinet Secretary Pramono Anung said the President respected any business decision the company made as he did not want to intervene in state firms' businesses.
In the finance sector, Financial Services Authority (OJK) chairman Muliaman D. Hadad announced policies that included an agriculture insurance scheme and establishing venture capital to pool funds for the creative industry.
'With the insurance scheme, farmers will be bankable. All this time, they have been unable to pay their debts as they suffer losses [due to crop failures]. But now, they can, as they will be protected,' Muliaman said, explaining that the government would subsidize 80 percent of farmers' insurance premiums so any potential crop failures could be covered.
The government has allocated Rp 150 billion for the scheme, which will cover more than 1 million hectares of rice fields in the future, as every hectare of rice field will get a subsidy of Rp 150,000 from the government, while the remaining Rp 30,000 will be paid by the farmers.
Bank Danamon economist Dian Ayu Yustina said the third package reflected better targeting by the government, citing a higher emphasis on export financing, the creative economy, along with micro-, small- and medium-sized businesses.
Dian especially highlighted the OJK's move to ease regulations on trustee businesses, allowing more commercial lenders and foreign banks to participate.
According to Dian, by allowing foreign banks to enter the trustee business, the government expected to lure exporters, in the hope that their export earnings would help boost foreign exchange reserves.
With regard to land the government will cut the business-licensing process for investment.
Information on land availability and proposals on land use will be registered in three hours each at the Investment Coordinating Board's (BKPM) one-stop service, compared with seven to 70 days previously.
Proposals and extensions for right-to-use for businesses (HGU) and right-to-build (HGB) will also be processed much more quickly than previously.
'In an attempt to support the economy in the land sector, the Agrarian and Spatial Planning Ministry will revise Ministerial Regulation No. 2/2015 on services standards and agrarian arrangements,' Darmin said.
Pramono and Bank Indonesia senior deputy governor Mirza Adityaswara both said the government was 'very serious about structural reform' so that it would continue announcing policies to support its vision, with a fourth economic policy package expected to be launched soon. The previous two packages were launched last month.
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