An employee of state-run electricity firm PT PLN.
Electricity prices are going up 15 percent
but not for smaller residential consumers
Smaller residential consumers will be shielded from the impact of the proposed 15 percent electricity price hike, Coordinating Minister for the Economy Hatta Rajasa said on Friday.
Consumers who use less than 30 kilowatt hours per month would not be affected by the rate hike, and would continue to enjoy a government subsidy for electricity, Hatta said. At present, at least half of the government subsidy goes to people who can afford to pay market prices, meaning it was not serving its purpose of supporting those most in need, he said.
“If we continue with the current scheme, I project that 50 percent of the current allocation for the electricity subsidy, which is Rp 54 trillion [$ 5.9 billion], will be enjoyed by users that don’t deserve it — larger scale electricity users,” Hatta said.
“This is why we’ve decided that we’ll only continue subsidizing the small scale users,” he added.
The government has allocated Rp 54.5 trillion for the electricity subsidy in the revised 2010 state budget, up from Rp 37 trillion in the original budget.
Keen to save on its massive subsidy bill, it has proposed a 15 percent hike for some users beginning in July, and has said it intends to phase out all energy subsidies by 2014.
The Energy Ministry has said the rate hike would save the government Rp 7.3 trillion in the second half of this year alone.
However, getting majority approval for the politically sensitive rate hike in the House of Representatives won’t be easy. Some lawmakers have argued that instead of raising electricity prices state-owned electricity company PT Perusahaan Listrik Negara should be forced to seek efficiency gains.
Eric Alexander Sugandi, an economist at Standard Chartered Bank Indonesia, said he supported the government’s plan to raise electricity rates for large-scale users who can afford to pay more.
“I think our country has not been efficient in using electricity,” he said. “We have been spoiled [by the subsidy] and the consumption rate should not be as high as it is. This results in our state budget and PLN having to carry the burden of inefficient electricity usage.”
Eric said people who used the most electricity, especially urban users, generally could afford to pay market rates, while those who used the least, especially in rural areas, needed the most assistance from the government.
“I think Indonesians need to be more disciplined in using their electricity, as we have to understand that our nation’s budget could be allocated for better uses such as infrastructure,” he said.
Consumers who use less than 30 kilowatt hours per month would not be affected by the rate hike, and would continue to enjoy a government subsidy for electricity, Hatta said. At present, at least half of the government subsidy goes to people who can afford to pay market prices, meaning it was not serving its purpose of supporting those most in need, he said.
“If we continue with the current scheme, I project that 50 percent of the current allocation for the electricity subsidy, which is Rp 54 trillion [$ 5.9 billion], will be enjoyed by users that don’t deserve it — larger scale electricity users,” Hatta said.
“This is why we’ve decided that we’ll only continue subsidizing the small scale users,” he added.
The government has allocated Rp 54.5 trillion for the electricity subsidy in the revised 2010 state budget, up from Rp 37 trillion in the original budget.
Keen to save on its massive subsidy bill, it has proposed a 15 percent hike for some users beginning in July, and has said it intends to phase out all energy subsidies by 2014.
The Energy Ministry has said the rate hike would save the government Rp 7.3 trillion in the second half of this year alone.
However, getting majority approval for the politically sensitive rate hike in the House of Representatives won’t be easy. Some lawmakers have argued that instead of raising electricity prices state-owned electricity company PT Perusahaan Listrik Negara should be forced to seek efficiency gains.
Eric Alexander Sugandi, an economist at Standard Chartered Bank Indonesia, said he supported the government’s plan to raise electricity rates for large-scale users who can afford to pay more.
“I think our country has not been efficient in using electricity,” he said. “We have been spoiled [by the subsidy] and the consumption rate should not be as high as it is. This results in our state budget and PLN having to carry the burden of inefficient electricity usage.”
Eric said people who used the most electricity, especially urban users, generally could afford to pay market rates, while those who used the least, especially in rural areas, needed the most assistance from the government.
“I think Indonesians need to be more disciplined in using their electricity, as we have to understand that our nation’s budget could be allocated for better uses such as infrastructure,” he said.
