BUSINESS COMMUNITY STRIVING FOR NEW POWER RATES' POSTPONEMENT

By Andi Abdussalam

Jakarta, July 10 (ANTARA) - The business community is still pushing ahead with its efforts to have  the government postpone the introduction of higher power rates  but so far there is no sign the initiative will have a chance to succeed. In the meantime, the new power rates  already took effect on July 1, 2010.          "We firmly reject the electricity tariff increase policy. At least we want the government to postpone it," said Franky Sibarani, coordinator of the National Association Communication Forum (ForKAN), a forum for groups of companies trying to discuss the tariff hikes with the government.           Business associations seeking a meeting with the government to ask for a postponement included  the Indonesian Young Entrepreneurs Association (HIPMI), the Indonesian Businesses Association (APINDO) and ForKAN.          "State power utility firm PLN cannot do much about the rate hike policy issued by the energy and mineral resources (ESDM) minister. Therefore, we will immediately seek a meeting with  the government. We firmly reject the imposition of the new power rate hikes," Franky Sibarani, said here over the  weekend.          Business circles have these weeks asked the government  to postpone the basic electricity rate increases. After all, it turns out that the hikes are far higher than the ones the government had previously promised, namely  10 percent on the average.          "The government should not raise the rates for the time being until at least there has been clarity about its calculations," Chairman of APKINDO Sofjan Wanandi said.          He said that previously the government promised that the hikes in the electricity tariffs would be  10-15 percent. With the rates, there would be no more business-to-business tariff negotiations over the maximum tariff capacity and multi-purpose tariff rates.          But in reality, he said, the tariff hikes based on the energy and mineral resources minister's decree, after they were calculated turned out to be significantly higher than the promised 10-15 percent.          After calculating it based on the ministerial decree, the total tariff hikes for type I-2 industry category increased 82 percent to Rp800/kWh from the previous rate, for textile industry the increase was to 30-40 percent, for the retail trade 70-80 percent, hotels 37 percent and the glass industry 35 percent.          According to the Indonesian Textile Industries Association (API)'s simulations, the textile industry would pay an average tariff increase of about 35 to 47 percent.          API chairman Ade Sudradjad said the national textile industry would not be able to face competition with imported products if the power tariff rates were not postponed this month.  "It would be better for us to become textile traders. We purchase imported goods whose prices are lower," he said.          The government has decided to increase the basic electricity tariffs by an average of 10 percent effective July 1, 2010. The decision was based on Article 8 Law No. 2 / 2010 where the subsidy allocation for electricity was set at Rp55.1 trillion with the assumption that the power rate hikes would be able to cover the subsidy shortage of about Rp4.8 trillion.         Businesses are expected to begin feeling the impact of the electricity tariff increases in the coming two or three months.  "We will feel the impact of the tariff hikes after the post-fasting month of Lebaran. Now we cannot  yet calculate the impact of the electricity rate increases because we have not received any explanation about the range of the hikes," Kalay Selwan, vice president for Public Relations of PT Asia Pacific Fibers said.          Selwan said that his company's need for electricity supply was big as it was producing weaving yarn  using electricity from state-owned electricity firm PLN.  "Our power supply need reaches 150 KVA and we consume some 38 megawatts. So, if the tariff is raised it will have a big impact," he said.          In the face of such impact,  HIPMI said the government needed to provide incentives for small-and-medium enterprises (SME).          "We want the government to provide new incentives for SMEs in the face of the tariff hikes. The new incentives could be provided in various forms such as cash assistance (BTL) or others," HIPMI chairman Erwin Aksa said.          He said that the government should pay attention to SMEs so that they would not lose profit too much and face cash flow difficulties. "Apart from that, it is important for the state power utility company PLN to guarantee that businesses would not face power supply problems," he said.          Not only small businesses,  people within the low-income bracket also need BLT to face the power rate increases. "The tariff hikes will be imposed on the middle-and-upper class customers but the increases will boost commodity prices.          Therefore, the government should provide compensation against the impact of the increases with BLT," FX Sugiyanto of the Semarang-based Diponegoro University (Undip) said.          He said that tariff  hikes must be balanced with the disbursement of direct cash assistance so that the people's purchasing power would not be weakened. The government,  in this case, should switch the subsidy for state-owned power utility firm PLN to the poor people.          With regard to the business complaints, Trade Minister Mari Elka Pangestu said businesses must calculate carefully the direct and indirect impact of the higher basic  electricity tariffs.          "If the rate increase is an average of ten percent and the production cost for electricity is five percent, then you can just calculate the approximate percentage of price increases for the goods produced,"  she said.          The minister said an increase in power rates will provide different prices impacts for each industry sector. "So, it should be carefully calculated how much the price increases for the goods produced after the rate is raised by ten percent," she said. (T.A014/A/HAJM/20:23/H-YH) 10-07-2010 20:39