Leony Aurora and Anissa S. Febrina, Jakarta – The government risks a backlash if it pushes on with a plan to raise power rates by more than the average agreed upon in the 2006 state budget, lawmakers warned Thursday.
Member of House Commission VII on energy Tjatur Sapto Edy said legislators had approved up to Rp 17 trillion (US$1.80 billion) in subsidies for state electricity firm PLN to cover rising fuel expenses, on the condition the government only raises power rates by an average of 23 percent in 2006.
"We agreed that rates for 450 VA (volt ampere) customers would not be raised," said Tjatur, who is also a member of the budgetary committee.
The biggest hike was supposed to affect household customers with a power capacity of higher than 2,500 VA and big industries, he added.
"The government should comply with this agreement," said Tjatur, adding that lawmakers would oppose any plan to raise rates by more than 23 percent.
National Development Planning Minister Paskah Suzetta said Wednesday the government was considering increases from 18.4 percent to 48.3 percent.
Paskah, speaking after an interministerial meeting, disclosed that increases for power capacity of between 450 VA and 900 VA would probably be less than 7 percent, but from 83 percent to 90 percent for consumers with capacity from 1,300 VA to 10,000 VA. Several industrial groups might see their rates double, he said, without identifying them.
"We will not pass a power rate hike that exceeds people's purchasing ability and an industry's competitiveness," said commission chairman Agusman Effendi.
He added that PLN's fuel expenses should be lower than initially projected amid the strengthening rupiah and declining price of high speed diesel.
Another commission member, Alvin Lie, also warned the government not to burden the people and industries, already hard hit by last year's fuel price hikes, with excessive increases.
He said PLN could lower its cost of production and improve efficiency through measures such as using less oil-based fuel and increasing the use of coal and natural gas.
The commission will summon the government technical team formed to discuss the hike and PLN for a hearing on Monday.
Separately, Minister of Industry Fahmi Idris said that his office was formulating incentives for industries most affected by the electricity rate hike, such as the textile sector.
Although he did not define the incentives, he said other industries would eventually adapt to the change in their production costs. "We do not have the option to disagree with the policy," said Fahmi.
Indonesian Textile Association (API) secretary-general Ernovian Gysmi warned that textile companies would have no other choice but to lay off workers if there was an increase in their production costs.
According to API data, 77 textile companies have stopped operation, leaving more than 8,000 workers jobless, since the government more than doubled fuel prices in October.
Analysts have warned that inflationary pressure caused by a power hike jump of more than 30 percent will be difficult to control, invoking between 2 percent and 3 percent inflation in the following month. This would in turn delay a recovery of the Southeast Asia's largest economy from last year's fuel hike shock.