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Jakarta Post

Govt offers business players two years for price hike

  • The Jakarta Post

    The Jakarta Post

  /   Tue, March 25, 2014   /  11:32 am

The Industry Ministry is seeking to settle an electricity price dispute between the government and business players by setting a two-year period to phase in the rate increase.

Industry Minister MS Hidayat said Monday that the solution, which accommodates the interests of both parties, would be proposed to relevant ministries and the House of Representatives for agreement.

'€œAll industrial sectors support the subsidy cut, but the drastic increase in the price of electricity in such a short period would affect companies'€™ cash flow,'€ Hidayat said.

'€œThat would lead to consequences that could erode domestic industrial performance overall,'€ he added, citing lower productivity and loss of competitive edge.

Under the government'€™s current plan, the price of electricity will be increased gradually until year-end. This follows four price increases introduced last year.

A total 38.9 percent increase will apply to publicly listed companies that consume medium-voltage power of more than 200 kilovolt amperes (kVa).

Industrial firms that use high-voltage power of up to 30,000 kVa will be liable to a 64.7 percent increase.

The increases in the basic rate of electricity are necessary for the government to meet its electricity subsidy for this year, which is Rp 80 trillion (US$7.03 billion), down by 19.8 percent from Rp 99.8 trillion last year. A higher electricity rate will help save Rp 10.96 trillion in the state budget.

Opposing the plan, business players demanded the government introduce a longer period to implement the price hike '€” from eight months to three years.

Responding to the Industry Ministry'€™s proposal, Indonesian Employers Association (Apindo) deputy chairman Franky Sibarani said if approved, the plan would help industry players counter the negative effects from a sudden price jump.

However, it would still be insufficient in helping them cope with the serious challenges from the implementation of the ASEAN single market next year, which will ease the flow of imported goods from Indonesia'€™s Southeast Asian neighbors.

'€œWe need a generous transition period if we don'€™t want to be burdened by surging production costs, which would undermine the competitiveness of our industry,'€ Franky told The Jakarta Post.

A three-year time frame, however, would be even better in terms of accommodating the interests of businesspeople, he added.

Indonesian Textile Association (API) Ade Sudrajat said, however, that his group would likely support the ministry'€™s proposal because it would relax the pressure on the industry.

'€œThe rise in the price of electricity in a short period would interfere with our cash flow and cause a mess in our budgeting,'€ he told the Post.

Ade said that the electricity rate hike would have a huge impact on both the upstream and downstream textile industry that would force producers to push up their prices, thereby undermining their competitive edge in the face of cheaper imports.

'€”JP/Linda Yulisman

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