INDUSTRIALISTS MAINTAIN REJECTION TO POWER TARIFF HIKES

Andi Abdussalam

Jakarta, Oct 25 (ANTARA) - Industrial circles maintain their opposition to the government's plan to raise electricity tariffs by 15 percent next year, saying it would increase production costs, boost imports, trigger inflation and disadvantage local consumers.          "Increased power rates will raise our product prices and thereby reduce their competitiveness against imported commodities," General Chairman of the Association of Indonesian Local Brand Owners (AMIN) Putri K Wardani said here on Wednesday.          The government will impose a quarterly 4-percent automatic power rate hike beginning from January next year in an effort to reduce swelling subsidies in all sectors, which will amount to Rp316.1 trillion in 2013.          The House of Representatives on Tuesday endorsed the government's proposal in the draft state budget to set aside a subsidy amounting to Rp80.9 trillion for electricity next year. The government is planning to reduce the power subsidy burden through an automatic electricity rate hike every quarter next year.            However, some quarters are of the view that the government should optimize the efficiency of its production cost and raw material expenditures, using gas rather than fuels, for example.          Associate chairman of the Indonesian Democratic Party of Struggle (PDIP), Effendi Simbolon once pointed out that the production cost for one kilowatt of electricity was six cents if gas was used and 25 cents if other kinds of fuels were used.          "The government should use gas for the production of electricity. But is this a cartel (so that it does not use gas), or should we disclose the cartel?" said Simbolon.          Therefore, AMIN, according to Putri K Wardani, is opposed to the government's plan to raise the electricity tariff because the move would negatively affect both, large and small-scale businesses.          An increase in electricity tariff will reduce the competitiveness of domestic products because it will raise their production costs while the prices of imported goods will remain the same.          Wardani noted that the hike in electricity rates would increase production costs in the cosmetics industry by 15-30 percent. As a result, locally made cosmetics will cost more.          "The tariff has not been raised in the consumption sector, but it has been increased by 15 percent in the production sector. This will boost inflation and eventually disadvantage the people," she pointed out.          "Actually, we do not want to increase the prices but neither do we want to suffer from losses," she added.          She said it would be better for the government to revoke the subsidy given to the 450-900 KwH bracket customers, who are over 40 million in number.          "If the subsidy for households is revoked it would raise revenue from the cost of electricity burden by Rp4,000 to Rp5,000 a month per household. This amount is lesser than the monthly cost of cellphone credit, valued between Rp50,000 to Rp100,000.          The same voice also came from the Indonesian Employers Association (APINDO). It has predicted that the increase in electricity tariff by 15 percent in 2013 will boost imports of finished goods.          "The competitiveness of local products and companies will be negatively affected. A number of companies will make losses because of the hike," APINDO chairman Sofjan Wanandi said.     He said that if the government raised the electricity tariff, a lot of companies would lay off many of their workers and outsource the jobs to contract workers.          "This would bring us back to the problems relating to the controversial outsourcing system," he stated.     Wanandi added that a lot of companies would reduce their workforce in order to increase production efficiency. "It would seem that one of the solutions could be to increase the price of industry products," he noted.          "However, if the electricity tariff rises and the prices of local products increase by 5 percent, the purchasing power of the public would also automatically be reduced," Wanandi explained.          Meanwhile, Secretary General of the Indonesian Food and Beverage Business Association (GAPMMI) Franky Sibarani expressed hope that the government would support local businesses amid the stiff global competition.          As per the 2013 State Budget law, the government is authorized to raise the electricity rates. "However, we reject the plan to increase the power tariffs," Sibarani stated.          The consumption sector's 450 VA and 900 VA consumers get annual subsidies amounting to Rp20.8 trillion and Rp18.4 trillion, respectively, but the subsidy for the industrial sector is much smaller, he pointed out.          "The production sector subsidizes the consumption sector in Indonesia, while in other countries it is the other way round," Sibarani added.          According to Jarman, the Director General of electricity in the Energy and Mineral Resources Ministry, industrial electricity consumers will receive a subsidy of Rp19.7 trillion in the wake of a 15-percent power tariff hike next year.          "The figure represents 25 percent of the total electricity subsidy of Rp80.9 trillion for 2013,¿ he said at a meeting with the House of Representatives (DPR) Commission VII on energy last week.          "The subsidy will be given to 41.9 thousand industrial electricity consumers," he added.          In 2012, industrial electricity consumers receive a subsidy of Rp24 trillion, accounting for 28 percent of the total electricity subsidy of Rp80.9 trillion.          Jarman said three groups of electricity consumers, namely households using electricity above 6,600 VA (R3), businesses using electricity above 200 kVA (B3) and government agencies using electricity between 450 and 900 VA (P1), will no longer be entitled to receive subsidies. ***2***  (T.A014/A/KR-BSR/A/A014) 25-10-2012 16:53: