Leony Aurora, Jakarta – Businesspeople, arguing that power rates are already higher than those in neighboring countries, are threatening to refuse to pay proposed additional charges, even if it means having their power cut off. All associations grouped in the Indonesian Chamber of Commerce and Industry (Kadin) have rejected the government's plan, Kadin's vice chairman on public policy, taxes and fiscal system Hariyadi Sukamdani said Thursday.
"If our rate was under the (international) standard, a hike may be acceptable," said Hariyadi. "But it is already higher." He contended that state power firm PT PLN had been inefficient in its electricity production, reflected in the power generation costs of Rp 816 (almost 9 US cents) per kiloWatthour (kWh) reported by the company last year, higher than the global average of 7 cents per kWh.
Businesses have reached an informal agreement to refuse paying the incremental charge above the current rate, he said, because they could not withstand the additional costs.
"It's OK if (PLN decides to) cut supply," said Hariyadi, quickly adding that the consequence would be a cease in operations of the companies and layoffs. State revenues from taxes and export duties would also decline, he said.
Kadin is compiling information on the effects of the planned power rates hike from member associations, which will be presented to the government and the House of Representatives. The report is expected to be finished within two weeks.
The government is considering the hike because PLN said operational costs this year would soar as it pays market prices – more than double the rate paid last year – for oil-based fuel to run its power plants.
To survive the year without increasing rates, PLN would need Rp 38 trillion in government subsidies, while the current allocation is 17 trillion.
State Minister of National Development Planning Paskah Suzetta said on Jan. 18 proposals to solve the problem include doubling electricity rates for several industries, although he did not name the sectors.
Chairman of the Association of Garment and Accessories Suppliers Suriadi said that in light of the hike, department stores were considering cutting opening hours from noon to 9 p.m. from the current 10 a.m. to 10 p.m.
"That way, we would only need employees for one work shift and pay one hour of overtime," said Suriadi, who is also a member of the shopping centers association.
"The number of sales promotion staff will be cut by half. Hundreds of thousands of people will lose their jobs." He added that a hike of up to 10 percent was still acceptable.
"But only if PLN removes the rate for higher peak hours that we are charged currently." Industries are charged double for electricity used during peak hours – between 6 p.m. and 10 p.m. – and a penalty for additional power consumed in those hours if a company uses more than half of its average usage.
The economy is still recovering from the 126.6 percent average fuel price hike of last October, which led inflation to end at a four-year high of 17.11 percent for 2005. Businesses are also suffering from increasing interest rates for lending as the central bank raised its benchmark rate steadily to curb inflation.
"We trusted the government and handed over a blank check for the fuel price hike," said Hariyadi, adding that it was much higher than expected.
"There will be no blank check this time. We will fight (against the hike)."