T

he Energy and Mineral Resources Ministry claims that there will be no significant impact on industries and small and medium enterprises (SMEs) if the power tariff is raised by 10 percent this year.

Based on a study by the University of Indonesia’s Institute for Economic and Social Research (LPEM-UI), industrial competitiveness and 90 percent of SMEs would not be affected by the price increase, the ministry’s Director General for Electricity, Djarman, said Friday.

“There are two options for the price increase policy,” he told reporters.

The first option sees an increase only for customers with installed capacity of above 450 volt-ampere [VA]. The second option is an increase for all customers, with a price rise applying to 450 VA and 900 VA customers if their consumption exceeds 60 kilowatt-hour (kWh).

Djarman said that the two options would be discussed with the House of Representatives “in the near future”. According to the 2009 Electricity Law, a price increase must be approved by the House.

The two options, Djarman added, were in line with government policy to protect lower-income customers.

The ministry calculates that if the government did not raise the tariff by 10 percent, the electricity
subsidy in 2012 could increase by Rp 8.9 trillion (US$992.08 billion) to 53.9 trillion, well in excess of the Rp 45 trillion allocated in this year’s budget.

With a 10 percent increase, the basic tariff, currently Rp729 per kWh, will become Rp 796 per kWh. State electricity company PT PLN’s power production cost stands at around Rp 1,100 per kWh. The remainder is subsidized by the government.

Indonesian Employers’ Association (Apindo) deputy chairman Anton Supit said that the power tariff increase would certainly influence industries. However, he said that the association agreed with the increase as long as it applied to all customers.

“We want to share the burden. The tariff for household customers should also be raised, but of course the increase should be proportional,” he said.

Household customers should be educated about how electricity was expensive and they needed to be wiser when consuming it, Anton said.

Energy expert and executive director of the institute for Essential Services Reform, Fabby Tumiwa, said that it was better for the government to increase the tariff for household customers with an installed capacity of between 220 VA and 450 VA.

“The best time for the government to increase the tariff is in March, or a month before the decision whether the price of subsidized fuels will be raised or not,” he argued.

The impact on industries and SMEs will depend on the size of their energy expenses compared to total production cost. Energy-intensive industries, such as steel and cement, could be severely impacted.

“For energy-intensive industries, the increase in production costs may reach between 15 and 20 percent,” he calculated.

As for the competitiveness of those industries, the most important factor was government policy, Fabby said. The tariff increase has to be revealed well before it is implemented so industries could prepare strategies to minimize potential impacts.