Norman Harsono and Dzulfiqar Fathur Rahman, Jakarta – More than 33 million Indonesian homes, businesses and public services are poised to see lower monthly power bills until December as the government injects Rp 15.4 trillion ($1.05 billion) into three electricity relief schemes in its bid to accelerate the recovery of the pandemic-hit economy.
The funding, part of the COVID-19 response, will be allocated on top of the Rp 54.79 trillion set aside for annual power subsidies, said the Energy and Mineral Resources Ministry's electrification director general, Rida Mulyana, on Tuesday.
It is expected that subsidizing the electricity fees will free up an estimated Rp 15.4 trillion in liquidity for customers, which the government hopes will boost household spending and help businesses avoid bankruptcy.
"We hope these [subsidy] numbers will go down, meaning that business activities will have resumed," Rida told reporters at a briefing. "And we can divert the limited state funds for other needs."
The three electricity relief schemes are part of the government's larger Rp 695.2 trillion COVID-19 stimulus package that aims to jump start Indonesia's coronavirus-stricken economy and maintain employment levels.
Indonesia booked its first decline in GDP in two decades with the economy shrinking 5.32 percent in the second quarter of this year, as all components of economic activity decreased.
The economy is expected to contract 0.4 percent this year or grow by only 1 percent.
The first electricity relief scheme, announced in April, slashed power bills for Indonesia's poorest households amid the large-scale social restrictions (PSBB) that halted economic activities.
The second scheme was introduced in May, with the government announcing it would waive bills for small-scale businesses, which employ the majority of the country's workforce. Meanwhile, the latest scheme erases minimum monthly electricity fees for all other businesses and public services.
Without the relief, existing regulations require PLN's business, industrial and public service customers in or above the 1,300 volt-ampere (VA) category to pay for at least 40 hours of electricity each month, even if they do not make use of it.
Rida said the first scheme, initially scheduled to end in June, would be extended until December. He also said the third scheme would be expanded to include "special category" customers such as special economic zones (KEK) and Jakarta's LRT.
State-owned electricity distribution company PLN will bear the losses of the expanded stimuli until it receives compensation funds, the mechanism for which is still being worked out by the energy and finance ministries.
Compensating PLN is urgent, as the company's financial standing has been creaking under the weight of the stimuli and of a weak rupiah exchange rate. PLN's profit nosedived 96 percent year-on-year to Rp 251.6 billion in the first half of 2020.
"We are prepared to execute the government's policy over electricity stimuli, especially in supporting the national economic recovery," PLN spokesman Agung Murdifi told The Jakarta Post via text message.
Association leaders and a researcher told the Post that, while the electricity relief schemes would definitely help businesses and poor households, the schemes had to be supported by other programs, including effective COVID-19 containment measures, to effectively ignite an economic recovery.
"With a pandemic, factors such as fear and concern can inhibit economic recovery by holding back consumption," said Hafiz Arfyanto, a researcher at SMERU Research Institute.
Separately, two business association leaders said that electricity bills contributed less than 10 percent of their regular fixed costs and thus, the schemes' impact alone were modest.
"The biggest contributors are salaries," said Sammy Hamzah, head of energy and mineral resources at the Indonesian Employers Association (Apindo).
In line with his statement, the government recently announced plans to subsidize the wages of 15.7 million workers by Rp 600,000 each month until December.
"The impact is not so significant if we're talking about electricity bills. Less than 10 percent of production costs are electricity," said Ikhsan Ingratubun, chairman of the Micro, Small and Medium Enterprises Association (Akumindo).
Ikhsan confirmed that all Akumindo-registered small businesses, defined as those under the 450 volt-ampere (VA) and 900 VA categories, had been able to take advantage of the electricity relief schemes.
Indonesian Consumers Foundation (YLKI) secretary Agus Suyanto said his organization had not received any complaints about eligible households not receiving the additional electricity subsidy, which suggests the scheme was well targeted.
"Under such conditions, the YLKI finds that, however much relief is given, it will help these homes," he said.